Mortgage Loan Compliance | Reform Bill Says Sue Your Lender

According to an analysis of the regulatory reform bill “base text” conducted by the law firm K&L Gates LLP, "in the case of judicial or non-judicial foreclosure or any other action to collect on a loan, it appears that a consumer has a perpetual federal right to assert such a violation by a creditor as a matter of defense by recoupment or set off in an amount equal to the monetary damages that could be asserted against the original creditor."

Language in the "base text" document of the reform bill could allow residential borrowers to sue their lender, without a statute of limitations, if the mortgage banker violates the anti-steering provisions of the law.

The anti-steering language is designed to prevent lenders from pushing borrowers into certain loans such as predatory loans, without regard of the borrower’s ability to repay, because the loan officer might receive higher compensation for delivering such a loan. The law firm is telling clients, "There is a lot to be digested in the base document, but it is important to stress that it is the starting point for negotiations among the conferees."

The "base text" is an amalgamation of the House and Senate versions of the bill. K&L Gates LLP notes that several provisions from the House bill pertaining to residential mortgage lending that were not in the Senate Bill are included in the initial base document.

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