Can you sue a hard money lender for fraud?
Hard Money Lenders
Hard money lenders will often provide loans to borrowers and use their real estate as collateral. This may include residential or commercial property, which is often referred to as a bridge loan.
Loans that are issued by hard money lenders are usually easier to get, which is because the hard money lender will not use loan approval guides or extensive credit checks like other lenders, such as banks. In addition, a hard money loan will typically have a much higher interest rate. A hard money loan usually has a much shorter payoff time as opposed to a traditional loan as well, which is typically less than 10 years. As a result, this typically means that borrowers are stuck with payments that are much higher than traditional bank loans.
Although hard money lenders don’t go through an extensive credit check like banks, they will verify an individual’s ability to repay the loan. This is typically carried out through income verification.
Legal Problems With Hard Money Lenders
Hard money lenders are typically associated with a wide range of legal problems. Some of these problems include hard money lenders failing to obtain the proper license to carry out a loan. For instance, if a hard money lender use residential or commercial property as collateral, they must have the proper license. In these situations, if a hard money lender doesn’t have the specific license to use property as collateral, any loan contracts they issued would be void.
In addition, there are also hard money lenders that are associated with loan fraud. An example of loan fraud would be if an individual is presented with a loan document that is different than any of the terms that were discussed between the lender and the borrower.
Many legal disputes that are due to hard money loan contracts will probably need to be resolved in court. A lawsuit is a way for borrowers to get compensation for any losses that occurred because of the fraudulent actions of the lender, and there are some fraudulent actions by hard money lenders that can result in criminal charges.
Pre-paid interest is another issue that typically arises with hard money loans. In most cases, lenders are not allowed to ask for more than two months of pre-paid interest for collateral that is residential property. However, this may be different when the collateral is commercial property.
A Lawyer can Help With Hard Money Lender Problems
Many individuals seek out hard money loans because they can get funds in a short amount of time, and they don’t need to submit as many verification documents as traditional loans. However, hard money loans do come with risks. If you are in a dispute with a hard money lender, it is best to contact an attorney. An attorney can examine your particular situation and provide you with guidance on how to proceed. In addition, if you need to file a lawsuit, an attorney is a necessary asset who can help you through the process and in order to reverse merge the financial transaction.