Is it legal for a law firm to demand more than twice the amount owed on a mortgage in a foreclosure proceeding?

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Is it legal for a law firm to demand more than twice the amount owed on a mortgage in a foreclosure proceeding?

We owe approximately $17,000 on our mortgage. The property flipper who purchased our mortgage from the original lender, demands $18,000 to remedy the loan and his law firm, which for some reason also happened to be the law firm for the original lender, is demanding $40,000 to remedy the loan. I’m not really certain, but something isn’t kosher in this situation. So is this legal or is this an extortion attempt that I could pursue in court?

Asked on April 13, 2012 under Real Estate Law, Missouri

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

A mortgage loan is a contract (with some additional protections; see below); therefore, the mortgagor (the borrower) only owes those amounts required under the terms of the mortage. You can't be required to pay more than the mortgage (and/or the underlying promissory note) themselves require--though be aware that in the event of default and/or foreclosure, it is common for some additional fees or costs (e.g. legal fees) to be included in the terms of the mortgage on as well. You should reference the terms of the mortage to see what you may be liable for.

Note that mortgages are also subject to the Truth in Lending Act (TILA), which requires certain disclosures--and that certain key information, like interest rates, fees, etc. be accurate disclosed. If these requirements are not met, the borrower may be entitled to monetary compensation or even to rescind the loan.

If you feel you may be being taken advantage of, bring your mortgage documens and all correspondence about the mortage and foreclosure to a real estate attorney to review with you, to determine your rights, your potential liability, and your options.


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