subject: Forensic Loan Audits Help [print this page] It may not be in the headlines, but we all realize the housing meltdown continues in 2010. Foreclosure rates are stubbornly high, despite so many efforts to reduce them.
1. Foreclosure rates remain high
2.Foreclosures are climbing the economic ladder, meaning higher priced homes are now coming under price pressure - even in the most sought-after locales.
3.Unemployment continues to drag the economy down. No significant relief is in sight...only a slowing of the rate of increase.
4.Commercial real estate is the next major industry to implodefollowed by credit card companies.
5.Inflation will be a problem soon, providing additional negative pressure on the economy.
6.Bailouts proved to be controversial in many ways and are not expected to continue.
There's no reason to expect that there will be any appreciation in home prices anytime soon. A report recently predicted that as many as 48% of homeowners will be "upside-down" on home mortgages by the end of 2010. More price erosion is expected in the coming months before the decline stops and we hit bottom. Gov't efforts to stem the tide of foreclosures, most notably the loan modification program, just gets more scandalously slow each month. Backlogs, erroneous denial of applications, errors galore...the banks can't hire and train fast enough to keep up. Some negotiators have as many as 300 files at one time! Real, meaningful principal reductions seem like so much hype at this point.
More than ever, you need to use every tool available to save your home! During the housing market run-up, lenders loosened their underwriting standardssome would say they abandoned themto sell more and more loans to meet the seemingly insatiable Wall Street demand for mortgage-backed securities (MBS). Loan originators, many of whom had been hastily recruited, poorly trained and with no experience in any other market condition, cut corners to meet high sales quotas. Lenders, brokers, appraisers, Realtors, and Home Inspectors responded with what has now been labeled predatory lending. Predatory Lending is unethical and some actions are illegal. Some violations have remedies that are inconsequential to most borrowers. After all, do you really care if Chase gets a nasty letter from a regulator, or if Wells Fargo gets cited for failure to provide triplicate copies of disclosures? No, what you care about is whether/not the error or omission or commission can now benefit you by improving your negotiating position in your loan workout. Predatory Lending was common. Actually, experts estimate that MOST Adjustable-rate mortgages, taken during the 2003-2008 timeframe evidence violation of consumer protection laws. Whether through unintentional errors caused by haste or through greed and blatant disregard for the law, the violations may now provide the leverage you need to negotiate a good workout solution.
What are the most common violations? Here are the top 10!
1.Charging fees without providing the services
2.Charging excessive points (more than needed to buy-down rate), higher interest rates or high fees
3.Charging for pmi (private mortgage insurance) in cases where it was not needed
4.Including single-premium life insurance policy (one that pays the mortgage if the borrower dies) and charging the premium in the loan - without adequate explanation of the product or the need for the product realtive to laon apporval.
5.Convincing borrowers to refinance so frequently that the fees charged "strip equity"
6.Failing to fully disclose and explain the terms of the loan
7."Teaser" rates on adjustable-rate mortgages to entice borrowers to accept high-risk products
8.Misrepresenting facts (income, home value, assets, etc.) on the loan application
9.Selling a more expensive loan than the borrower could actually qualify for
10.Targeting poor, uneducated, elderly or minority groups with unfair loan products and taking advantage of their vulnerability
11.Making loans that were "not in the borrowers' best interest"
12."Promising" to refinance "soon" in order to convince borrowers to accept bad loan terms
If I was able to show you how your lender violated laws during your loan processing and that some of the violations were serious enough to warrant a suit, would you be more confident in workout negotiations with that lender. Oh, I think so! Lenders and others were pretty well versed in the law and how to stay on the fringes. So, often your findings will not reveal big violations. But, the auditor may uncover a "pattern" of behavior thatdemonstrated disregard for your rights and that harmed you.
I highly recommend you conduct a Forensic Loan Audit:
1.the loan was made during the 2002-2008 timeframe
2.if your loan was sold to you through an independent broker (not an employee of the lender)
3.if your loan is an Adjustable-rate, negative-amortizing, "Pick-a-Pay" Option ARM, or interest-only loan payment type
4.if the loan is a sub-prime loan or an Alt-A loan
5.if loan has pre-payment penalty of ANY kind
6.if the loan is a stated-income loan
7.if you felt unduly pressured to get the loan or to sign the documents
8.If you were pressured to accept terms and costs that you had not been advised of earlier...with promises of a refinance in the near future to a better loan
9.If, either when you took the loan or during the projected life of the loan, your debt-to-income ratio was (or was projected to be) higher than 40%
10.If you were pressured to accept mandatory arbitration, limiting your legal rights.
Legal Action - worth it? The loan modification process is a negotiation. The more leverage you have the more likely it is that you will succeed. Proof of lender violations of TILA, RESPA, HOEPA or state or federal consumer protection laws can give you a significant advantage. Forensic Loan Audits are professional audits of the loan and the process used to qualify you and the property for the loan. They are extensive. They are performed by auditors, specially trained in spotting violations.
Three observations in 2010
I am convinced that Forensic Loan Audits give leverage to homeowners in loan modifications negotiations. Workouts are routinely concluded faster and better for borrowers who present such information during the negotiations. Secondly, I have observed that the power isofte in the effective use of the information. That is, even common results from an audit can be used effectively in negotiations as a signal that you are serious about the negotiations and will not just stand in line...like everyone else. finally, I've seen that often there are what I call "low-hanging fruit". These are clear violations of a serious nature that can be readily identified. An informed consumer can spot these violations without too much effort. After that it is simply a matter of finding a trustworthy auditor. More on this topic, next time.
