Forensic Loan Review and Mortgage Loan Securitization Audits
The goal of the Forensic Loan Audit is to determine whether there were violations of federal law in your loan documents. Many mortgages written between 2003 & 2007 may be legally unenforceable due to defects like lost documents, improper notices, appraisal and/or predatory lending. A Forensic Loan/Mortgage audit can help clients identify possible violations which may have occurred at the closing and facilitate the client and their respective legal counsel with proper legal grounds to litigate with a lender.
The following are common reasons to conduct a Forensic Loan Audit:
• General Loan Documentation Errors – Real Estate Settlement procedures Act (RESPA) Violations, Truth In Lending Act (TILA)
• Violations – Home Owner Equity Protection Act (HOEPA) Violations – Good Faith Estimate Compliance – Misleading Disclosures -
• Overstated Home Values – Overstated Income In The Loan Application – Lender And Broker Misrepresentations – Usury Violations
• Excessive ARM Adjustments – Excessive Points & Fees – Predatory Lending – Forgery- Loan Flipping
Predatory Lending and Origination Fraud
We investigate material facts including the terms of the loan, whether there is a prepayment penalty, or any other information which a reasonable borrower would want to and should know before accepting the loan. Did the mortgage broker or loan officer or anyone working for the broker or loan officer fail to disclose any material facts to the borrower?
FRAUD AND NEGLIGENT MISREPRESENTATION
Were any representations, statements, or comments, whether they be written or oral made by the loan officer, broker, notary or anyone else which contradicted the terms of the loan documents?
When a mortgage professional makes errors which a reasonably diligent mortgage professional would not have made, he or she may have made a negligent misrepresentation.
BREACH OF CONTRACT
The note and its attachments are a legal contract. The broker must follow all the terms of the contract such as the way the interest is calculated, and the penalties it assesses. Were there any terms in the contract which the lender failed to follow?
If these violations are found, then the borrower may be eligible for complete relief of the predatory loan (refinanced only) or a very favorable loan modification. Complete relief of the predatory mortgage is called as a loan rescission. Meaning the lender takes back the “predatory loan” and awards or credits back to the borrower all interest made on payments thus far, loan origination fees, all applicable lenders fees, penalties and attorney’s fees.
A true “forensic loan audit” examines homeowners’ appraisal, mortgage and supporting documents, in the context of the dealings surrounding the creation of those documents; so legal defenses can be discovered that a homeowner can use to avoid foreclosure. Or to use the law offensively to obtain favorable refinancing on the borrower’s terms, an equitable and fair Loan modification, an approved Short sale, a possible principle reduction, etc..
There are some essential elements to an effective loan audit:
• A loan auditor should not promise to uncover lender violations; it’s not a guarantee that can be kept.
• A good loan audit is comprehensive and involves a review of every document in a client’s mortgage contract.
• A loan audit should be forensic; that is, scientifically conducted.
• A loan audit should be performed by human eyes, as well as a computer program.
• Mortgage documents should be reviewed and compared to all relevant and applicable mortgage case law.
• A loan audit should be in writing with an analysis indicating problem areas that your client should know about.
• In the end, a loan audit should give the client a clear indication on how best to proceed with negotiations for better mortgage terms for the client.