Bad Faith Lending and Foreclosure

Texas is one of many states to have implemented a residential foreclosure mediation program in an effort to minimize foreclosure rates in the wake of the struggling housing market. These mediation programs encourage homeowners and lenders to work together towards coming up with a payment solution that helps avoid a foreclosure. The two parties are expected to meet with one another and a mediator in order to come up with loan modifications, repayment plans, forbearance agreements, or any other mutually agreeable strategy by which the loan can be paid off without the home being foreclosed upon.

These mediation programs have helped a great deal to alleviate the foreclosure problem; however, it has also created an opportunity for lenders to act in bad faith. When a bank acts in such a way as to stall or sabotage the negotiation process, debtors may be able to take a bad faith claim to court and receive a judge’s ruling in their favor.

Common Bad Faith Tactics

While it is important to note that judges will not generally rule a lender’s actions as “bad faith” when the lender is working within the terms of the contract, there are a number of common bad faith tactics debtors should watch out for. A lender may be acting in bad faith if it:

• Fails to provide notices in a timely manner
• Breaches contractually stipulated collection terms
• Lies about balances or fees owed
• Attempts to collect undue taxes

Though the state of Texas does not lay out any specific penalties for bad faith tactics, lenders can be ordered to amend their behavior in future mediation. In some extreme cases of lenders acting in bad faith during negotiations, courts may rule to stop the foreclosure.

Contact a Dallas Wrongful Foreclosure Attorney

At Gagnon, Peacock & Vereeke, P.C., our real estate attorneys have helped a number of clients deal with wrongful foreclosures. We rely on an extensive knowledge base gained through years of experience in real estate litigation to help you fight for your rights as a homeowner. If you are struggling with a difficult lender, call our Dallas office today at (214) 824-1414 to learn more about how we can help you.