Forensic Loan Audit- Finding Mortgage Violations

If you own a home in the state of Virginia, Maryland, Washington DC, Delaware, North Carolina, South Carolina, Pennsylvania, Florida, Nevada, Texas, Georgia, Colorado, Oregon, Washington , Arizona, Utah or anywhere else in the Country for that matter and suspect your loan contains mortgage violations, you should  obtain a forensic loan audit.  Even if you do not understand RESPA, TILA, Regulation Z, or HOEPA you should do your research regarding forensic mortgage audit and forensic loan audit services available to you.

In the late 1960’s the Consumer Credit Protection Act was enacted to protect consumers from predatory lenders.  As a result of the act, consumers theoretically could, in its wake  feel more secure in borrowing from mortgage and other credit lending institutions. From 2005 – 2008 our lending institutions  created the worst economic meltdown of our lives as a direct result of underwriting millions of mortgages without regard for any of our federal underwriting guidelines.     Finding Violations within your mortgage documents is the keystone to building a case against your lender to which they will respond (90+% of the time) with an offer to modify the terms of your mortgage or allow you to short sale your property without the risk of a deficiency judgement..

.  While you may qualify for a mortgage modification without finding violations of underwriting statutes, the amount of leverage you will be able to apply during the mortgage modification negotiations with your lender are multiplied when you possess a forensic mortgage audit report with RESPA and TILA violations.

Predatory lending is defined as unfair, fraudulent, or deceptive practices that occur during the mortgage origination process.  When you obtain a mortgage loan, your lender ”should” look at your credit history, employment history, and finances to determine your risk as a borrower and your ability to pay .  Typically they will look at your debt to income ratio to determine if you can afford the mortgage.   And they should look at your current income as it relates to the MAXIMUM your mortgage could cost.    For adjustable rate mortgages, the DTI should be determined at the fully indexed interest rate, which is the highest rate the mortgage can adjust to as the note is written.    Furthermore, they should examine the home value with an appraisal.  The appraisal is based on location, other home values in the area, the condition of the home, size of property, the general neighborhood, when it was built and many many other factors.   Many appraisals performed in these past 5 years were done by “drive-by appraisers. ”    We have found in our Forensic auditing practice that many lenders used prior appraisels from prior financing events and still charged the homeowner for an appraisel on their HUD 1.      You wont believe what we find in our  Mortgage Audits.

Predatory lending by  definition is when a lender specifically designs a mortgage product knowing that the consumer can not afford it. If a loan will index out to an interest rate that is beyond normal DTI standards for example it is predatory.   If a mortgage indexes out to a payment that is more than the homeowner makes, it is criminal.    We are seeing these mortgages.  Often.    If thefinancing event was designed such that the mortgage broker or lender knows at the closing of a Mortgage that the consumer / will be forced to refinance in two or three years and yet again give a chunk of their equity to greedy mortgage bankers during the process, the mortgage was predatory. If the Mortgage broker took large unearned fees in a mortgage process, the mortgage was predatory. If a mortgage is designed to index to higher interest levels as interest rates move up but do not move downward when interest rates fall, the mortgage was predatory.

In defining predatory lending and examining what the forensic audit might discover we will look specifically at federal and state mortgage violations.  Unfair or abusive mortgage violations include unjustified risk- based pricing, single premium credit insurance, failure to offer a negotiable loan price, clearly disclose terms and conditions, loans with disproportionately high fees, and securitization abuse.  These abuses are defined under the Truth in Lending Act or TILA. TILA includes Regulation Z which discusses costs of a loan which must be calculated and disclosed accurately.  For example any finance charge disclosure must be within 1/8 percent of the actual annual percentage rate.   If the first disclosure notice offers an APR of 5.99 percent the final loan documents must be within 1/8 percent of 5.99 percent or it violates TILA and RESPA and is an actionable mortgage violation.

HOEPA is the Home Ownership and Equity Protection Act, which again refers to restrictions on high cost mortgages.  However, under the Home Ownership and Equity Protection Act the mortgage violations can also include a unfair debt to equity ratio used to underwrite the loan.  The Consumer Credit Protection Act that encompasses TILA and the other lending regulations states that no loan should be offered where equity over time is lost due specifically to the terms of the loan.  It should be noted that a forensic audit will find mortgage violations in primary mortgages, secondary mortgages as well as home equity loans.

A home equity loan is a secondary loan based on the debt to equity ratio.  Equity is defined as the amount owed on a primary mortgage minus the value of the home, thus the debt to equity ratio.  If you owe $150,000 and your home is valued at 250,000, you have $100,000 in equity. HOEPA guides that you cannot borrow more than you can afford, or more than the equity in the home.

A forensic mortgage audit will examine your loan documents for any of these numerous violations which may have occurred.  We have already discussed how mortgage underwriting documents must be exacting in the disclosures made that relate to the final APR and the finance charge on the final TILA disclosure. Violations related to the finance charge on the Final TILA disclosure by the way, may very well lead to a potential rescission action. Find out how rescission works in another article on this site. We have also discussed other violations such as the debt to equity ratio violations.  This would be considered risk based pricing as well as a failure to allow for a negotiation of loan pricing.

If you suspect that any of these violations have occurred you should without a doubt seek a forensic loan audit.  Find an auditor you trust who works with attorneys who negotiate mortgage modifications and/or sue lenders routinely. These services will seek evidence against your lender for predatory lending practices.  Once you have the evidence you were sold a predatory load or that other violations of RESPA, TILA, HOEPA or ECOA are evident, you can begin to fight a lending institution. Typically evidece of predatory lending is used to force a lender to accept a beneficial mortgage modification. Modification to a mortgage might include mortgage rescission.  The right to rescind is possible if certain violations occurred at the underwriting of your mortgage.  A loan rescission reverses your loan. Your lender must return all of the fees associated with the underwriting of the loan and all of the interest payments you have given to the bank since its origination. A mortgage rescission is a very nasty event for a mortgage lender.

Before any action can be taken against your lender, you will need to locate all of your loan origination documents. You may want to send a QWR- Qualified Written Request under section 6 of RESPA to your lender demanding copies of all of your loan documents to make sure that your auditor has everything that your lender has. You may also require an attorney after completing the audit to enforce your rights through negotiation of a mortgage modification or by suing your bank for rescission.

Legal Forensic Auditors is located in Warrenton Virginia within a law office.   Our attorney is very much up to date on the current ongoing Federal and State litigation arising from  violations of RESPA & TILA.    We audit mortgages from any state and have compliance Attorneys in  Delaware, Maryland , North Carolina, Georgia, Illinois, California, Nevada, Arizona, Ohio and Pennsylvania who have partnered with us to help distressed homeowners in their home state .   We are actively seeking litigation attorneys from other states and partner with them as we find serious violations within mortgages from a particular state.

Fill out this form if you have questions about short sales, mortgage modifications or forensic loan auditing.    Our telephone number is 540-341-1481 email   info@LegalForensicAuditors.com