Predatory Lending & Foreclosure Defense Cases

Foreclosure is a legal proceeding brought to remove a homeowner from their home. Generally, a foreclosure lawsuit is brought because the mortgage holder contends that the homeowner has failed to make payments on the mortgage loan. In some states, the foreclosure can be brought non-judicially (i.e., no hearing or judge). In South Carolina, there is only judicial foreclosure, meaning that a homeowner is entitled to defend the case before a judge and, in some cases, before a jury.

Different sources provide different figures for the number of foreclosures currently outstanding. In general, however, most or all sources agree that the number has been increasing. It is expected that the number of foreclosures will continue to increase because many of the mortgages made in recent years (particularly those made in the "subprime" market) carry adjustable payments that will continue to increase, sometimes to an amount well beyond the homeowner's ability to pay.

Predatory Lending is a term that covers a number of fraudulent, deceptive, discriminatory or unfavorable loan practices. Many of these practices are illegal, while others are legal but not in the best interest of the borrowers. The worst (and most dangerous for consumers) type of predatory lending is abusive mortgage lending. Some of the ways that homeowners are taken advantage of include:

• enticing them to refinance their existing home loan to "tap into the hidden equity" in their home. While there are legitimate reasons for home mortgage refinancing, unscrupulous mortgage brokers seek to arrange refinancing in exchange for fees at closing, without regard to the benefit to the homeowner or the homeowner's ability to pay the new loan.
• offering mortgage loans (typically for refinancing) with deceptive finance terms. Such loans often involve adjustable rates (which as a practical matter only increase). Some seemingly low "teaser" interest rates expire as early as the first payment. Loans may also carry prepayment penalties or call for a "balloon payment" -- a lump sum payoff after a certain number of payments are made.
• Loan "flipping" - repeated refinancing of the same property, usually by the same lender (with new closing fees each time).

What these lending practices have in common is that they are engaged in for the benefit of the broker, originator, and/or lender, without regard to the effect on the consumer. Often the effect is disastrous and leads to foreclosure.

There are numerous laws which protect consumers from these practices, including federal laws such as the Home Ownership and Equity Protection Act (HOEPA), the Truth in Lending Act (TILA), and the Real Estate Settlement Procedures Act (RESPA). There are also special protections for active members of the armed forces who are sued or foreclosed upon.

In South Carolina, some mortgage lending is regulated by the South Carolina High Cost and Consumer Home Loans Act, S.C. Code 37-23-10, which was passed by the South Carolina General Assembly in 2003. Home mortgage brokering is regulated by the South Carolina Residential Mortgage Loan Broker Act, which broadly defines a mortgage loan broker as "a person or organization who brings borrowers or lenders together to obtain mortgage loans." S.C. Code 40-58-20(3). South Carolina also requires that, in connection with a mortgage loan closing, a borrower's preference for choosing a closing attorney and insurer is ascertained (the so-called "Attorney Preference" statute found at South Carolina Code 37-10-101, et. seq). Certain other consumer statutes that may apply include the South Carolina Unfair Trade Practices Act. (SCUTPA), S.C. Code 39-5-20.

We are experienced in litigating all of the above claims in federal and state courts in South Carolina. If you are facing foreclosure or you feel that you have been a victim of any of the above practices, contact us today.