Whenever I look through mortgage documents, my goal is ultimately to find things that can be used to resolve a question or problem. One of the more straightforward findings is breach of contract by a broker, lender, servicer, or seller. Breach of Contract is generally fairly easy to understand, but due to complexities with mortgages, comes in many forms. Let’s look at a few of them.
Breaches of Contracts are fairly common. This includes parties who do not adhere to agreed upon terms. These types of breaches are apparent on the face of the documents. Since we are dealing with large amounts of money, the Statute of Frauds generally requires these terms to be documented in writing. Sellers of property and mortgages can fail to deliver the quality or quantity of building or Notes and Security Instruments described or provide agreed upon documentation for due diligence. Borrowers and buyers can fail to deliver payment, perform in a timely manner, or provide adequate protection of security interests by allowing insurance and upkeep to lapse. As in any good story, to really understand what happened you have to start at the beginning, with the Sales Contract and analyze the adherence of all parties. While
However, there is another more subtle type of Breach of Contract which plagues the mortgage industry, and that is vendor delivery of services in relation to mortgage activity. This can be a servicer who overcharges for default services and pockets the difference, or forced placed insurers who overcharge and rebate the lender, or even an appraiser who doesn’t perform their appraisal within the scope and guidelines they certified. These are more subtle because contracted services are being performed, but the key is identification of why they aren’t being performed exactly in the way contracted for, or are being performed in bad faith to cause damage to the recipient to prevent them from benefitting from the transaction.
Reasons for Breach of Contract are commonly but not always money. While direct monetary benefit of a vendor is a clear motivation, many sellers are not sophisticated enough to fully document and deliver as agreed upon in Sales Contracts. Many borrowers default in response to perceived wrongdoing of the lender or servicer. Many vendors are not experienced enough to properly perform services they were contracted for.
Proper documentation to understand the Breach of Contract is paramount. Sometimes that documentation is as simple as a servicers record for default services, sometimes it is expert analysis of a vendor, and sometimes it is a Contract and hundreds of pages of supporting documents showing exactly where and how that Contract was breached. Breach of Contract generally breaks down into the age old detective story of who, what, when, where, why, and how.
With understanding from documentation, finally it becomes apparent how a Breach of Contract may be resolved by letter such as a Notice of Grievance or Qualified Written Request, claim which can include claims against bonds and insurance, legal, or other action. If you have further questions about Breach of Contract and your situation, let me know.