Do you feel that your mortgage lender has taken advantage of you? Wrongly denied a mortgage modification? Caused you credit problems? A low-budget lawsuit could get your lender's attention without breaking your own bank. Here's what you need to know.

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Suing your lender in small claims court

Just because your mortgage lender is a big company doesn't mean you can't drag it into small claims court. It's easy, cheap, and there are no lawyers allowed, so you needn't be intimidated. You can get your case resolved in a matter of weeks, probably a lot faster than you can get a status on your HAMP application.

Understand what you can claim

You need to show how much your lender's actions have cost you, or what needs to be done to undo the damages caused by it. Depending on your state, a judge may be able to order a loan modification, require credit restoration or award monetary damages to you. One homeowner who sued Bank of America was granted a reduction in his mortgage balance by a judge, the lender's punishment for dragging out the HAMP process for over a year and ruining his credit.

How do you file?

Most jurisdictions have similar procedures for suing in small claims court. Here they are:

  • Fill out a complaint form and pay a small fee to file it.
  • Serve the lender using a process server or certified mail. Lenders are usually corporations or limited-liability companies (LLCs) and you should be able to get the correct address and recipient from your Secretary of State's office.
  • The lender is given time to respond (typically 20 days). It may just decide to cut you a check and save itself the trouble of getting spanked in court. If there is no response, you may be able to get a default judgment in your favor. If the lender responds and does not settle, you'll have a trial within 60 days.
  • No lawyers are allowed in small claims court, although you can get legal help to prepare your case if you choose,
  • The judge will decide the case at the end of your trial or within a few days.

How much can you sue for? Check the limit for your state. Then look up your state's rules; they have different rules about the claims you can make. If your mortgage servicer isn't dealing with you in good faith, stop getting mad and start getting even.