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Loan
Audits
Our favorite
"Buzz" words-Forensic Loan Audit. These
three words have the ability to make your lender jump
through hoops. We're guessing that 1,000 loan audits
would produce three loans without violations...that's
just a guess though! Our
compliance analyzer platform is utilized by four of
the top five mortgage lenders in the nation, and over
250 financial institutions and regulators.
1. Truth-In-Lending Act (TILA) Violations
— Inaccurate reporting of APR and finance charge
calculations on borrower disclosures. Calculation
errors may occur as a result of failing to include
one or more prepaid finance charges in the calculations,
incorrect disclosed funding dates, or last-minute
changes made to the loan by the settlement agent at
the closing table. If understated, the lender is in
violation of the federal Truth-In-Lending Act as well
as many state laws prohibiting such actions. Lender
required to reimburse borrower for the difference,
and may be subject to statutory damages, administrative
sanctions, loan buy-backs, and lawsuits. In addition,
the rescission period may reopen, creating additional
risk for the lender.
2. Anti-Predatory Lending
Violations — Consumer protection laws,
regulations and guidelines exist at the federal, state
and local levels, and function by placing strict but
varying limits on the rates and fees that can be charged
to a borrower. Violations typically occur because
of the vast misunderstanding of how they work. Examples
of violations include failing to include fees such
as yield spread premiums in the calculations or using
an incorrect loan amount value to perform the calculation.
Penalties for violations
are as varied as the laws that govern. Typical costs
include borrower reimbursements, statutory and punitive
damages, attorneys’ fees, administrative fines
and penalties, loan buy-backs and reformation, and
class-action lawsuits.
3. State Law Violations (Non-Predatory)
— Failing to maintain adequate safeguards in
loan origination systems and well as document software
systems results in loans containing illegal terms
or provisions. Examples include illegal prepayment
penalty clauses, rates that are usurious, or fees
that are not allowed to be charged. Typical
penalties include actual damages and costs, attorney’s
fees, administrative fines and penalties, loan buy-backs,
and class-action lawsuits.
4. Reverse Mortgage Violations —
With an expected 55 million Americans turning 62 in
the coming years, the “next big thing”
will almost certainly be reverse mortgages. Common
violations include failing to adequately disclose
the APR, which is different than that of forward mortgages,
and providing incomplete or improper disclosures.
Because this is such a new segment in the industry,
penalties are less clear than with forward mortgages.
As these types of mortgages affect senior citizens,
class-action lawsuits are a real and serious threat.
5. Real Estate Settlement Procedures Act (RESPA)
Violations RESPA prohibitions place limits on a lender’s
or broker’s ability to charge or pay fees that
are hidden from the borrower. Common violations include
accepting kickbacks or referral fees, upcharging for
services provided by third parties, and charging for
services not actually performed. Penalties include
actual damages, administrative fines and class-action
lawsuits.
Others: Lending without providing borrowers a reasonable,
tangible net benefit, state-specific disclosure errors,
servicing violations, Fair Lending violations
We specialize in providing you with a full forensic
audit report with # of counts after reviewing:
a. Loan application;
b. Right to Cancel;
c. Deed of Trust;
d. Note;
e. Adjustable rate note;
f. Addendum to the note for the interest only payment
period;
g. Truth in Lending statements;
h. Good Faith Estimate (GFE);
i. HUD 1;
j. Appraisal;
k. All documents received from last transaction
This service is a very specialized and imperative
in identifying if a borrower is a victim of predatory
lending. We review all loan documents and perform
a thorough investigation for miscalculations and to
determine if the loan terms are accurate, truthful,
and met the requirements of the applicable federal
statutes.
Our #1 goal is to determine whether there were violations
of federal law. If these violations are found, then
the borrower may be eligible for complete relief of
the predatory loan. This is known 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.
This can be done by means of a loan modification or
a new affordable loan. This allows the borrower to
get a new loan with a smaller principle, meaning that
the mortgage can be affordable and non-predatory.
FORENSIC LOAN DOCUMENT AUDIT
• Complete client interview and all applicable
parties
• Complete loan document and disclosure audit
by 30 year underwriting and fraud and compliance mortgage
professional
• Truth in Lending Act (TILA) and Real Estate
Settlement & Procedures Act (RESPA)
• Reverse engineering of your loan terms and
Annual Percentage Rate (APR) for possible TILA violations
• Complete 20 – 30 page report with all
violations and findings
CONSTRUCTIVE FRAUD
Material facts include the terms of the loan, whether
there is a prepayment penalty, or any other information
which a reasonable borrower would want to know before
accepting the loan. Did the 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,
written or oral made by the loan officer, broker,
notary or anyone else which contradicted the terms
of the documents?
NEGLIGENT MISREPRESENTATION
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 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?
LOAN AUDIT REPORT
• Results report of all factual findings of
the forensic audit
• Any and all applicable federal law violations
• The real terms of your loan
• Outline of hidden fees and/or commission earned
by your broker or lender
• A complete assessment so you can pursue possible
legal claims against your broker and/or lender
• List Report of all counts against lender /
broker and 3rd parties involved
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