I recently did a search on Google for "mortgage audit" and came up with 369,000 entries.  I am amazed at how many "forensic loan auditors" there now are.  I know of companies charging anywhere from a couple hundred bucks to ten thousand.  I am a practicing attorney and my focus is on mortgage litigation and i think the mortgage audit is a joke.  Most results are wrong.  Even when there are technical violations, the borrower likely does not have a viable claim due to other reasons. 

If you really want to know if you have a legal case, talk to a laywer.  Do not pay anyone any money for an audit that is supposed to somehow give you leverage with the bank.  It doesn't.  Sorry if this offends anyone, but i get several calls a week from people who are excited due to the false hope they were given and have spent money they did not have for some auditor to tell them they have a great case.  Please save your money.

I remember two years ago thinking, what are all of these loan officers and real estate agents going to do after the contraction of the industry?  Well i think most of know the answer.  Loan Modifications have become more than just a cottage industry.  As a mortgage attorney and real estate broker, my firm has been involved in these, well i guess since the beginning.  I say the beginning, because despite all the adds from those claiming years and years of experience, i still think loan modifications as they exist today are a more recent phenomenon.  We did our first loan mod in 2007.

Anyways, i'm always interested to hear about experiences by homeowners in this area.  Specifically, did you use an attorney? a broker? or did you do it yourself?  I have heard hundreds of success stories so i know all three options can produce results.  Here's my analysis but i would love to hear others:

Do It Yourself:
This is obviously the lowest cost option.  Aside from the financial advantage, it is unlikely that anyone will care about your home and your mortgage as much as you.  If you are a detailed, organized and persistent person, this may be a good option for you.  I tend to recommend this for people who are current on their mortgage and do not anticipate missing payments due to unaffordability.  In other words if you have a decent loan, but are tired of hearing about your friends and neighbors getting reduced payments and balances and think you should also get something, this may be for you.  Chances are you are not going to have a lot of "legal" issues since you can afford your home and are not likely to fall into foreclosure regardless of the outcome.  The other reality is that lenders are more willing to help those who need help.  For this reason the chance of success for you is lower.  No sense in paying for a service that is not likely to produce results.

Broker:
Broker shops definately understand mortgages.  They often are staffed with processors and underwriters who are efficient and competent when it comes to working with lenders.  The downside is they are unable to counsel you on issues such as bankruptcy, foreclosure defense, tax issues, etc.  Given their limitations, i tend to think they should be considered as a lower cost alternative to an attorney.  I know, I know, there are exceptions and there are some brokers who are far better than some of the attorneys doing this.  remember, these are just my general broad stroke comments.  I have great affinity for brokers.  I have been a licensed broker longer than i have been an attorney.

Attorney:
First, let me clarify that i am speaking of an attorney that has experience with real estate / loan issues.  I don't know the first thing about workers comp so even though i technically can practice in that area, don't hire me for it.  Anyways, hiring an attorney should give you a few advantages.  First, they should be able to provide you competent counsel about your issues, options, consequences, etc.  Am i subject o a deficiency judgment?  What about the fact the title is in my spouse's name?  Will i get a 1099 after a foreclosure?  These are just some of the questions that likely come up when analyzing these issues.  As discussed above though, use an attorney for attorney work.  if you just want to test the waters and see what the lender will say, probably not a good use of money to hire an attorney to do it for you.  Maybe as an alternative, pay for a one hour consultation with an attorney and then do it yourself?  just a thought. 

I'm not really hear to promote my firm, so i'm not going to pepper this post with phone numbers and website addresses.  I'm really just interested in hearing what others think about the options facing homeowners today.

I have a client that fell victim to an unscrupulous realtor.  Basically the client was pursuaded to purchase 3 homes as investments which would be flipped within a couple months.  The problem was that it happened to be end of 2006.  There are other details involved, but my issue is this; I want to examine the standard of care for an agent.  Hopefully some agents who view this can express what they consider to be their fiduciary duty when advising a client.  At what point should a realtor be held liable for their recommendations?

As a follow up on this issue, what should be considered reasonable efforts in promoting a listed property?  Is a single picture on the MLS sufficient?  what response time is appropriate in responding to inquiries?

My goal as an attorney is to praise the good and admonish the bad.  I think in doing this, the real estate industry is well served by protecting the reputation of the profession.  Hopefully i am not alone in this view, but would love to hear feedback.

Occassionally i get a client that comes to me and says they want to do a "RESPA request" or a "QWR" (Qualified Written Request).  What they are referring to is a requirement under the Real Estate Settlement Procedures Act (RESPA) that requires lenders to reply to a written request for information or statement of dispute from a borrower.  The lender must acknowledge receipt of the letter within 20 days and respond within 60 days.  An example would be a life of loan accounting.  The lender would then have 60 days from receipt to provide this.  Another example would be a dispute regarding a service fee.  This would have to be investigated and addressed within the 60 day period.

Now, if the lender does not do this, there is some civil liability.  If found liable, the lender must pay actual damages (probably minimal or non-existent in most cases), attorneys fees, and possible $1,000 (if it can be shown that there is a pattern and practice of the violation). 

Here are things a QWR does not do:
- stop a foreclosure
- stop negative credit reporting (unless there is a dispute as to a credit reporting issue)
- stop the collection of payments
- guarantee a loan modification

Overall, RESPA is a useful consumer law that is violated by lenders/servicers on occassion.  It is a good way to obtain information as well that may form the basis of a later civil action.  In order to make a QWR you simply have to identify the loan and borrower in a letter sent to the servicer along with a request for information or dispute.  As with many laws, its always best to seek legal counsel.

I've been asked a few times recently what happens if the Good Faith Estimate is inaccurate or never provided after origination.  RESPA requires certain initial disclosures, some of which are included in the GFE.  The law requires they be sent out within 3 days of application.  Noticeably silent is a requirement that they are signed or acknowledged.  Most brokers/lenders have the borrower sign it because it is a great way to protect them down the road in case someone claims they did not get it.  Most lenders require it as part of their underwriting from the Broker just to be safe.  Largely though, as with many laws that affect Mortgages, their is not necessarily a civil right of action.  In other words, the government can pursue the culprit, but individuals cannot.  Thats not to say that you could not use the violation as part of a state law claim, (unfair deceptive and practices act, etc.). 

As for the GFE not being accurate, truthfully it would be hard for the initial GFE to be accurate.  Its just too early for the broker/lender to know all the details.  It should be redisclosed though as soon as it is known to be inaccurate, and definately before closing.  We have argued in our cases that a severely inaccurate initial GFE is evidence that a broker/lender was defrauding the borrower.  Interesting topic.

Disclaimer:
This should not be construed as creating any attorney/client relationships, or the providing of legal advise to anyone.

In my practice we have gotten more and more into loss mitigation services.  Specifically, we have been working with borowers to negotiate modifications.  I have noticed a wide variation between different lenders approaches to this common problem.  As an example, Suntrust Bank seems very proactive.  They send out letters inviting borrowers to initiate the process and seem receptive to reasonable offers.  Conversely, dealing with ASC has been problematic.  I have been told by numerous representatives that they absolutely do not modify a loan below the initial rate of the loan.  What they really push are forebearance agreements, which often is not enough for the borrower.

Does anyone else have examples of different experiences with lenders in loan modifications?  I am working on a table outlining the different requirements and options for each lende and any input would be appreciated.

One of the things we check for on all cases is the accuracy of the fees disclosed to the borrower.  When a borrower signs there loan they receive a Truth In Lending Disclosure Statement.  This form, which disclosed the APR, etc., satisfies the "material disclosure" requirement of the Truth In Lending Act.  The problem we sometimes see is that the fees on used to calculate this form, often found on the "Itemization of Amount Financed" form, are less than what is shown on the final closing statement.  How can this happen?

It usually requires the "assistance" of a willing escrow company.  Basically, the broker increases his demand to escrow.  This should be caught by the funder at the lender when they review the final Hud1, but what if escrow prepares 2 different versions, one for the borrower and one for the lender?  We have discovered the scam on multiple occassions.  The result of course is that the borrower did not get accurate material disclosures and thus is entitled to a rescission (see my other posts regarding rescission).  The remedy can be significant.

I guess the moral to the story, if you are a mortgage broker, is don't ever change fees after loan signing, even if escrow allows it.

I have been asked more and more what the effect of bankruptcy is on a foreclosure.  As a California attorney i want to limit this discussion to California residents, although the laws in other states are likely similar.  A bankruptcy filing stops all foreclosure proceedings.  This is true even if it is filed the day of the Trustee sale.  What we are seeing more of is the benefits of a Chapter 13 filing.  In a chapter 13, a payment plan is arranged with a trustee.  Essentially credit is categorized (secured and unsecured) and a plan is setup to satisfy debt obligations.  The plan is 3-5 years in length.  In the case of 2nd mortgages that are effectively unsecured due to declining property value, they can be treated as unsecured, just like credit card debt.  The significance of this is that at the end of the plan unsecured debt can be completely discharged.  This can be a favorable result and arguably the best "loan modification" available to someone.

It is important to consult with a bankruptcy attorney when dealing with these issues, as they can be complex at it is important they are done correctly.  The laws are also continually changing, but a good attorney can be a great resource.

Given the implosion of the mortgage industry, I am noticing more and more advertisement for business loans.  Many former hard money lenders are now focusing on "business loans".  Many lenders mistakenly think these loans are not subject to the Truth In Lending Act.  I am handling several lawsuits under this exact premise.  By simply adding a disclosure that says "this is a business loan", or even having the borrower sign something attesting to the fact, is not the determining factor.  The commentary to Regulation Z gives some guidence here, but its basically substance over form.  Setting up a loan as a "business loan" and then not providing the otherwise necessary disclosures will likely lead to future problems.  Its always best to consult with an attorney if you are engaged in making these loan types, and if a borrower happens to get such a loan, a consult with a consumer attorney may be very rewarding :)

The requirements under the Truth In Lending Act and the Homeownerhip Equity Protection Act (HOEPA), also found in Regulation Z (226.32), are very difficult to comply with.  I have had numerous successful suits against hardmoney lenders and i rarely see one that was done correctly.  There are essentially two areas to be concerned with when making these type of loans.  First, there are added restrictions, such as limitations on prepayment penalties, negative amortization, default rates, balloon payments, etc.  If the loan contains any prohibited terms, it is a violation and subjects the loan to an extended rescission (see my other post on extended rescission).  Second, there are additional disclosures that must be provided to the borrower that are very specific.  They basically tell the borrower that the loan is horrible and they shouldn't get it (paraphrasing :).  These disclosures must be provided 3 days prior to signing, and if they are not, then the loan is also subject to the extended right of rescission.

There are also additional statutory penalties, and in some state, California included, the lender may be subject ot punitive damages (California Covered Loan Law, section 4970).  If you are a hard money lender, a good attorney is invaluable.  Make sure your documents are compliant and your procedure is also proper.  You don't want to see anything from my law firm hit your desk :)