Most Home Equity Loans Contain Errors; Does Yours?

Texas has traditionally had very strong state laws to protect homeowners. In fact, the state didn't even allow homeowners to borrow against the equity in their homes through Home Equity or HELOC (Home Equity Line of Credit) Loans until 1998.

Since then, hundreds of thousands of Texans have borrowed against the equity in their homes to finance home improvements, consolidate debt, pay for college, or whatever else they wanted to do with the proceeds. They did so with the assurance that they were protected by the most homeowner-friendly protections in the nation. But since then, banks have lobbied hard to water down those protections with various amendments that benefit themselves over homeowners. Read about how Home Equity borrowing in Texas forever changed on January 1, 2018.

Surprisingly, most Home Equity Loans prior to 2018 do not comply with the strict consumer protections that were initially written into the Texas Constitution. In fact, since 2010 we've examined thousands of loans (at no cost to our clients) and discovered that about 87% of them contain one or more violations!

When violations are brought to the attention of the bank, the law requires they "cure" or fix all violations. Legally, they are given fair opportunity to "make things right" with minimal consequence to them.

Sometimes they do the right thing and make the borrower whole, but often times they refuse to do so - ignoring their legal obligation. In these instances, you, as the borrower, may be entitled to cash compensation and/or your lender may be required to return all your payments and void your lien so that you own your home without owing anything on your mortgage!

Even if you took out the loan several years ago, you still have time to examine your loan documents to see if you too are the victim of fraud, predatory lending, or illegal loan practices that are common with these loans.

If you aren't sure if your loan contains errors, take advantage of the resources on this page to discover for yourself if your loan is one of the 87% that contains errors. If you have questions, call our friendly staff at  713-590-3066 for a no cost or obligation consultation, or click here to schedule a meeting with us at your convenience.

We're happy to perform a comprehensive audit of your loan documents without cost or obligation, so what do you have to lose? 

 

5 Step Guide to Determine if your Loan is Illegal

 


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The [Home Equity Loan] audit is designed to identify whether or not mistakes have been made by your lender. That could be charging more than they're allowed to originate the loan, it could be lending more to you than they're allowed to given the value of your home, it could be failing to provide you with documents.
 

 

 

If you aren't sure whether your Home Equity Loan contains errors, read our 5 Step Guide to Determine if Your Loan is Illegal below. 

The guide is designed for Home Equity Loans that originated prior to 2018. It will show you step-by-step how to examine your documents to determine whether your loan has errors. Plus, if your loan does contain errors, it will show you how to demand the bank fix the errors - without an attorney! In a hurry, or just want to take the guide with you? Click here to download it now.

 

1. Locate Your Loan Documents

The first step in determining if you were the victim of an illegal loan is to locate your loan documents. What you are looking for is the set of documents that you received upon signing for your loan. The document set may be in a folder or envelope with a title company's logo on it.

The document set includes a Settlement Statement, a Texas Home Equity Note, a General Warranty Deed, a Texas Home Equity Security Instrument or Deed of Trust, an Acknowledgment as to Fair Market Value of Homestead Property, and other miscellaneous documents. If you've refinanced you loan, then find the documents associated with the most recent loan.

If you are unable to locate your loan documents, contact the title company who processed your closing and they should be able to provide copies at no cost to you. If you didn't receive copies, that is a violation. If you did not go through a title company, you likely have an illegal loan!

 

2. Locate Your Settlement Statement

Now that you've found your loan documents, look for your Settlement Statement. It is a standard form used to itemize actual settlement costs. The words "Settlement Statement" will appear at the top of the document that looks like a chart with four columns. It is typically on legal-sized paper and looks similar to the image below.

First: Find the Principal Amount of New Loan(s) on line 202. Multiply the amount that appears in line 202 by 3%. (For example, if the Principal Amount of New Loan(s) is $100,000, 3% of $100,000 = $3,000). This is the maximum amount you can be charged in fees.

Then: Add up any and all fees paid by adding all the figures in the Borrower’s (left) column on Page 2 of the Settlement Statement.

These fees include:

•    Administrative Fee
•    Appraisal
•    Assignment fee
•    Brokerage fee
•    Closing fee
•    Commitment fee
•    Courier fee
•    Credit report
•    Deed restrictions
•    Document preparation
•    Endorsements to Title Insurance
•    Escrow fee
•    Escrow waiver
•    Flood certification

•    HOA Maintenance Fee certification
•    Life insurance (if required by lender)
•    Mortgage insurance
•    Origination fee
•    Pest inspection
•    Processing fee
•    Property tax certification
•    Property tax service fee
•    Recording fees
•    Survey
•    Title insurance premium
•    Underwriting fee
•    Warehouse fee
•    HOA transfer fee

 

HUD-1 Settlement Statement

 

Not sure about which fees are counted and which aren’t?

Call the experts at The Lane Law Firm at 877-408-3328 – they’ll guide you through the calculations, or examine your documents for violations for you at no cost, and without any obligation.

 

 

Finally: If the total of fees are greater than 3% of the loan, you likely were charged too much in fees, making your loan illegal.  Skip to Step 5 to see how to fix the problem, or continue on to Step 3 to see if your loan has additional violations.

 


 

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The Lane Law Firm brought it to my attention that in getting a home mortgage that sometimes mortgage lenders, banks, make mistakes. I brought in all my mortgage materials...and they found what they believe were eight constitutional errors. Someone actually forged...
-William Bissell, Satisfied Client

 

 


 

3. Locate Your Acknowledgement of Fair Market Value

The Acknowledgement of Fair Market Value is a required document that provides the fair market value as determined by the lender on the day the loan was given.

First: Is the document signed and notarized by all parties, including the lender?  If not, your loan is likely illegal. Skip to Step 5 or continue looking for violations.

Then: Find the “fair market value” dollar amount on the Acknowledgement of Fair Market Value document. Multiply the amount by 80% to determine the maximum loan amount. (For example, if the Fair Market Value is $100,000, 80% = $80,000).

Finally: Find the Principal Amount of New Loan(s) on line 202 of the Settlement Statement (from Step 2). Add this to the balance of all other loans attached to the home (if any). Referring to our previous example, if the sum is greater than the Fair Market Value which was $80,000 in this case, you likely were loaned too much, which would make your loan illegal. 

Skip to Step 5 or continue looking for more violations.

 

 

Not sure about what the fair market value is?

Call the experts at The Lane Law Firm at 877-408-3328 or click here to schedule an appointment – they’ll guide you through the calculations, or examine your documents for violations for you at no cost, and without any obligation.

 

The Lane Law Firm Wins a Victory for Texas Home Equity Borrowers

Texas Supreme Court Ruling Restores Strong Texas Constitutional Protections

Read More

 

4. Other Violations

In addition to the common violations in Steps 2 & 3, the Texas Constitution provides many additional requirements that lenders must adhere to. But so often in their haste and greed to lend money, they fail to follow the legal requirements.

Some additional violations include:

  • Did the loan close anywhere other than the lender’s office, a title company, or in an attorney’s office?
  • Did the loan close within 12 days after receiving the “Notice of a Loan Governed by Texas Constitution Section 50(a)(6)?”
  • Did the loan close within one day from receiving a final itemized disclosure of all fees and points of interest costs and charges or did you see the final documents for the first time at closing?
  • Is the signature of the spouse or co-owner (if any) missing from the Deed of Trust (also called the Texas Home Equity Security Instrument)


If you answered "yes" to any of these items, you likely have an illegal loan. By law, the bank must correct any violations. Keep reading to find out how...

 

 

Not sure if you have any violations?
Call the experts at The Lane Law Firm at 877-408-3328 or click here to schedule an appointment – they’ll examine your documents for violations for you at no cost, and without any obligation.

 

Quote Mark light grey
The [Home Equity Loan] audit is designed to identify whether or not mistakes have been made by your lender. That could be charging more than they're allowed to originate the loan, it could be lending more to you than they're allowed to given the value of your home, it could be failing to provide you with documents.
 
 

 

5. How to Correct an Illegal Loan

So you’ve determined that you likely have an illegal loan. In order to have the violations corrected, you must notify the bank by sending a Demand Letter requiring that they correct the error(s). The bank then has 60 days to “cure” the violations by paying you a fine of $1,000 and correcting the exact violation(s) by refunding money and/or re-closing the loan.

First: Compose a well-written, typed or hand-written demand letter to your current mortgage servicer. You should include the following:

1.    The full name of all borrowers on the loan
2.    The last four digits of all borrower’s social security number
3.    Your property address
4.    The full loan number
5.    Specify the violation(s) you found in your Home-Equity Loan
6.    Demand that the mortgage company cure the listed violation(s)
7.    Notify lender that they must comply to your demand within 60 days

Then: If the bank ignores your Demand Letter or claims they didn’t do anything wrong, you must file a lawsuit to enforce your rights. You can do this pro se, meaning you represent yourself, or you can hire a lawyer to draft the petition and negotiate on your behalf.

You should only consider lawyers with expertise in Home Equity Loans and who have experience in litigating (and winning) hundreds of similar cases in Texas.

Check with the State Bar of Texas and on-line attorney rating services such as Avvo. The Lane Law Firm specializes in Home Equity lawsuits and can represent you and your Home Equity violation case completely on contingency in most cases. To schedule your no cost, no obligation appointment, click here or call 713-590-3066. 

We typically represent clients with home equity loans that are not in default on a contingent basis. That means there are no out-of-pocket costs to you for our representation. We only get paid if we recover money for you, so you have nothing to lose and so much to gain.

 

Want to Take the "5 Step Guide" with You?

 

You've read the guide, now take the test to see if you are one of the 87% who got ripped off!

FIND OUT FOR SURE BY TAKING THE HOME EQUITY TEST

Texas Home Equity Loan Test

With the Home Equity Test, you can quickly and easily find out if you are a victim too. If so, you may be legally entitled to:

  • Have all violations corrected
  • $1,000 in compensation
  • All payments returned
  • Free & Clear house (lien removed)

These remedies may only be available if you act within four years.

To determine if you have an illegal loan, take the FREE Home Equity Test today.  

If the mortgage company refuses to correct the violations, you are entitled to what some of our clients have already won - a FREE HOUSE.

Time may be running out on your opportunity to correct violations so don't delay, take the test today!

Click Here to Take the Test Now! 

 


 

Home Equity Lending Forever Changed on January 1, 2018

On November 7, 2017 Texans passed Texas Proposition 2, also known as SJR 60 or the Home Equity Loan Amendment (2017). It made changes to Section 50(a) of Article 16 of the Texas Constitution, and became effective January 1, 2018. 

Key changes to the law include:

  1. Lowering the limitation of fees that can be charged to the borrower from 3% to 2% and removing certain fees from this calculation.
  2. Expanding the list of lenders authorized to make Texas home equity loans.
  3. Allowing Texas home equity loans to be refinanced as rate-and-term refinances.
  4. Repealing the prohibition on originating a Texas home equity loan secured by a homestead property with an agricultural tax exemption.
  5. Eliminating the 50% threshold for advances on a home equity line of credit (“HELOC”).

Home equity loans that originate after January 1st of 2018 will be impacted, as well as loans made prior to the change that are refinanced after January 1st. For more information on the impact of the change, read How Home Equity Borrowing in Texas has Forever Changed.

 

FAQs

Below are answers to the most common questions we hear from clients. If there is a question you have that we didn't cover, give us a call at 877-408-3328.

No! Your mortgage company is bound to the terms of your contract regardless of your attempts to keep them from taking advantage of you. It would be illegal for them to change your terms or otherwise “punish” you.

If the mortgage company violated your constitutional rights in the origination of your loan, they must fix the violations or the lien is wiped out and they are required to refund to you all payments made on the loan - principal AND interest.

Absolutely! Just because you’ve done your part and paid your mortgage on time doesn’t mean the bank has the right to take advantage of you.

Yes, but the process is different. If you are in default on your mortgage, we offer Foreclosure Relief Services that can halt the foreclosure process while we negotiate your desired resolution through a Loan Modification, Short Sale, or other loss mitigation alternative.

Most of our compensation is earned thorough a contingency, which is a portion of the money received thorough any settlement. There are no “out of pocket” fees required of our clients. If we don’t win, we don’t get paid, so there truly is no risk to you to make a claim!

No, making a claim will NOT affect your credit score.

By law, the mortgage company is given only 60 days to fix violations. If they ignore or choose not to fix them, additional legal proceedings will be necessary, and those can take several months to a year or longer.

Yes, accepting a settlement should not affect your ability to obtain a new mortgage in the future; especially since most settlements contain a confidentiality clause protecting you.

It depends on the value of your house and the total amount of payments you’ve made. If your lien is voided, you will not owe the remaining balance and you may receive all your payments back.

Lawyers are prohibited from making guarantees when litigation is involved. Like all legal cases, the outcome depends on the merits of the case as well as the opinion of the court. So, while we can pledge to give your case our best effort, we can’t guarantee a specific outcome.

Yes, absolutely. The Lane Law Firm has negotiated successful outcomes for hundreds of clients with similar cases. Some clients have even received "free houses." Remember that each case has a unique set of facts, circumstances, and parties involved which affect the outcome.

Use our 5 Step Guide to Determine if Your Loan is Illegal, or simply provide us your loan documents and we will perform a comprehensive audit at no cost and without obligation.

In 2016 The Lane Law Firm was successful in getting the Texas Supreme Court to acknowledge that there is no statute of limitations to make claims, so they can be made at any time. However, if you do not make a claim within four years of origination, the amount you are able to collect may be limited, so it is important to act quickly before it is too late.

We recommend you continue to make your regular monthly mortgage payments.

Congratulations, you are among the less than 13% of borrowers who have a loan with no violations! You’ll have the peace of mind knowing you weren’t taken advantage of.

Nothing. You will be provided our findings along with our recommendations at no cost, and without any obligation.

Call The Lane Law Firm today at 713-590-3066 (or toll-free at 877-408-3328) to arrange for a free audit of your documents. We’ll confirm the violations and seek a cure and payment for the violations.

Absolutely. We recommend you read the 5 Step Guide to Determine if Your Loan is Illegal which contains instructions on how to demand the bank fix violations without an attorney.

Audits are typically completed in 2-3 business days.

Only the most recent loan should be examined for violations. If your loan was refinanced prior to January 2018, it is still a home equity loan – even if no additional cash was taken out. If refinanced after January 2018, you might have chosen to re-characterize the loan as a rate-and-term refinance, in which case you’ve lost all the constitutional protections that come with a home equity loan.

Reverse mortgages, home equity lines of credit (HELOC), and cash out refinances are all types of home equity loans.

Have a question we didn’t answer? Give us a call at 877-408-3328, or click here to schedule a free consultation.