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Lender Liability

Schlecht, Shevlin & Shoenberger and the Rise of Lender Liability Cases in California

Business Lawyers in Riverside County, CA litigate lender liability cases throughout the state

The economic downturn, tightening of credit, and the increase in foreclosures has spawned a rash of new lender liability lawsuits in California. Borrowers raise lender liability claims to defeat or prolong foreclosure actions. Frustrated business borrowers file lender liability lawsuits after banks break promises to lend money. Schlecht, Shevlin & Shoenberger, has successfully pursued lender liability litigation on behalf of clients throughout California.

Lender liability as a foreclosure defense

Residential and commercial borrowers faced with foreclosure call upon a variety of lender-liability claims to defend themselves. Some of the most common residential foreclosure lender liability defenses are as follows:

  • The foreclosing lender does not own the mortgage and has no right to foreclose
  • The lender failed to comply with federal regulations when closing the loan
  • The lender failed to foreclose in accordance with California law
  • The lender engaged in predatory lending practices, lending money when it knew the borrower could not afford the loan

Commercial foreclosures provide additional ammunition for lender-liability claims:

  • The lender exercises excessive control over the borrower’s business and is liable for the borrower’s actions
  • The lender commits fraudulent acts in connection with originating or servicing the loan
  • The lender participates in a borrower’s fraud
  • The lender fails to act in good faith or fairly as required by the Uniform Commercial Code (UCC)

Schlecht, Shevlin & Shoenberger, a law corporation, represents both borrowers and lenders in foreclosure cases in San Bernardino and Riverside Counties and throughout California. They understand the lender liability defenses and how to use them to gain a favorable outcome.

Recent trends in lender liability cases

In recent years because of the tightening of credit, new lender liability cases arise when the bank reneges on a promise to lend money to a borrower. The cause of action is either breach of contract or breach of the UCC’s good faith and fair dealing requirement. If the lender backs out of a loan commitment, and the business is damaged because it is unable to borrow the promised funds, the lender can be liable for the damages. If the business has closed its doors as a result of the lender’s actions, the damages can be extensive. If the business is still in operation, the borrower might be able to negotiate a loan workout using lender liability as a bargaining tool.

Lender liability litigation requires specialized knowledge and experience

Lender liability cases are an important part of Schlecht, Shevlin & Shoenberger’s commercial litigation practice. Schlecht, Shevlin & Shoenberger’s success statewide in lender liability lawsuits is a result of the firm’s experience in California UCC disputes, business transactions, banking regulations and securities litigation. Contact Schlecht, Shevlin & Shoenberger at 760-320-7161 or online for an appointment in their Palm Springs offices.

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