We are often asked what we look for in a forensic loan audit.
Typical items we look for when conducting a forensic loan audit:
(1) Did each borrower or person with ownership interest in the property get two copies of the proper Notice of Right to cancel with the Rescission dates filled in? (Federal Truth in Lending requirement - TILA).
(2) Were the material TILA disclosures made, and were they accurate if made (APR, Finance Charge, Amount Financed, Total of Payments, Payment Schedule). If these disclosures were not or defective in nature, an extended three year right of rescission exists in non-exempt transactions.
(3) Were the good faith estimate and preliminary truth in lending statements given to the borrower within 3 days of giving the loan application?
(4) Were advance fees improperly collected?
(5) Was the broker/loan officer/lender properly licensed at all stages of the loan origination process?
(6) Was the ARM / Option ARM / Negative Amortization Loan accurately disclosed in the note and adjustable rate rider and any loan program disclosure? Were the disclosures consistent?
(7) After the broker/lender ran the credit, were the credit scores disclosed and factors affecting risk properly disclosed?
(8) Did the Client receive a copy of the appraisal?
(9) Can the lender or investor produce the promissory note and prove it has the legal right to collect the debt? This is not so much a forensic audit issue, but rather an issue that can be raised at a later date. Not finding a copy of the promissory note in the loan file also triggers the need to have them produce the note so we can verify the actual terms of the note.
(10) Is the note clear and comprehensible (or do we have grounds to argue that a contract was never formed - that there could be no meeting of the minds)?
(11) Unfair Competition - If we find a violation of RESPA, Truth in Lending or HOEPA, or other law, do we have grounds to assert that the lender has engaged in unfair, deceptive and/or fraudulent business acts and practices and seek the imposition of a constructive trust forcing the lender to disgorge any ill-gotten gains or to seek an injunction? Countrywide was sued under Business and Professions Code Section 17200 and 17500 for false advertising and deceptive business practices.
(12) Were the loan documents properly signed and notarized?
(13) Option Arms / Negam Loans: These loans are predatory in nature and potentially unconscionable. The terms of the note and adjustable rate rider and loan program disclosures may conflict making it virtually impossible to properly understand the terms of the loan and to disclose this properly per truth in lending requirements.
(14) Is the loan substantively unconscionable and thus unenforceable?
(15) Was there fraud, deceit, deception, coercion or undue influence used against the elderly (elder abuse issues)?
(16) If the lender targeted minority groups, where the contracts negotiated in the language of the borrower (lender would be required to sign documents in a certain protected language of the borrower or a right to rescind is created?
(17) Was there predatory underwriting on stated income loans (i.e. underwriter did not verify borrowers stated income via salary.com, 4506-T statements, or in another manner as required by their internal policies - turning a blind eye and not following their own underwriting policies to get a loan done)?
(18) Were there excessive fees that Violate HOEPA? Or a Lack of HOEPA disclosures? Or excessive YSP fees that are predatory in nature that feathered the nest of the broker at the expense of the borrower?
(19) Was the borrower asked to sign conflicting disclosures or documents such as two different ARM disclosures or two different truth in lending statements that reflect two different APR's or Interest rates (evidencing potential bait and switch or deceptive loan practices)?
(20) Were FICO scores and credit risk factors properly disclosed?
As you can see, we are closely scrutinizing the work of the lenders and holding their feet to the fire. They have rules they need to comply with, and they should be held accountable where their legal violations are uncovered.
Note: The strength of these violations depends upon whether or not your originating lender still holds the loan or whether a third party investor purchased the loan on the secondary market. In addition, there are no guarantees, promises or representations made that a loan audit will reveal any of these loan compliance or legal errors. Every file is different. We are never required to follow-up our audits or loan modification services with actual litigation. Attorney has the sole discretion whether or not to accept any litigation cases. This is an advertisement and communication pursuant to state bar rules. We only seek to represent Clients in Arizona and California where the attorney is licensed to practice law.
Don't forget to hear our loan modification radio show on KLAA radion or www.LoanModRadio.com
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