A loan audit is a comprehensive loan fraud/predatory lending investigation report that will identify infractions and violations committed by your lender and/or broker when they originally funded your loan. Obtaining an audit should be the first step on your quest to successfully modifying your home loan. If you are behind on your mortgage payments, facing default or foreclosure, the audit is a critical tool that can be used as leverage to argue your case with your lender(s). It will highlight laws that were broken by your broker or by your lender, if any. In almost 100% of cases, we find violations in RESPA*, TILA*, and in some cases, egregious Article 32 Predatory Lending violations*. [RESPA = Real Estate Settlement Procedures Act. TILA = Truth-In-Lending Act. Article 32 Predatory Lending = This law is devoted to identifying certain high-cost, potentially predatory mortgage loans.]
You are not alone in this nationwide financial crisis. Times are extremely tough for millions of homeowners like you, and thankfully there many active laws that protect you. If you are having trouble paying your bills, your income cannot support monthly expenses and you ultimately are unable to make your mortgage payment(s), the good news is you have recourse with your lender that inevitably help you keep your home. The main goal of a loan modification is to stop foreclosure of your home. Foreclosures do not help or benefit anyone — not even your bank. An attorney and/or law office that specializes in loan modifications and debt negotiations is your best option to assist you in this process. An attorney can make your lender act on your case in your favor, and a loan audit can only help to successfully restructure your loan.
What is included in a Loan Audit Report?
- Results report of all factual findings of the 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 and/or lender
- A complete assessment so you can pursue possible legal claims against your broker and/or lender
Loans with illegal terms or conditions are not enforceable. Foreclosures resulting from illegal loans are also not enforceable. The foreclosure process is stopped when litigation on a questionable loan begins. Mortgage payments are not required during the foreclosure or litigation process. Lenders will choose the most rational and fiscally sensible response when presented with the legal facts. When facing their legal options: modifying your loan, foreclosing your home, paying some high-priced attorneys to litigate, or risking stiff federal fines and penalties, the majority of lenders will choose loan modification as the most financially sensible option.
98% of all mortgages are potentially ELIGIBLE to be RENEGOTIATED due to Truth in Lending Act violations according to a review of thousands of mortgage documents. The 5 most common mortgage violations that break laws within the Truth in Lending Act and Real Estate Settlement Procedure Act are:
- Missing paperwork. The federal Truth in Lending Act states that lenders must clearly disclose key loan terms and costs at the time of the mortgage application and home closing; however, if paperwork is missing, buyers may never see the final mortgage terms and costs. 98% of the mortgages we review include this violation.
- Bad “good-faith” estimates. Good faith estimates are intended for buyers to compare and contrast one mortgage offer to another. However, some brokers write low-ball good faith estimates to “bait and switch” homeowners by representing that they will offer lower costs and mortgage terms, then later inserting higher interest rates, higher closing costs or mortgages that homeowners can’t afford. We see 21% of this violation in its mortgage reviews.
- Incorrect payment representations that drive up APRs. Unscrupulous lenders play a bit of a shell game with Truth in Lending Disclosure Statements, which are estimations of the cost of borrowing money to buy a home, the expected payments for a mortgage and other related details. When lenders fill out these documents with incorrect information, particularly in the payment section, the Annual Percentage Rate for the loan changes with each error, leaving homeowners with unexpected payment increases that can lead to foreclosures if the homeowner cannot handle the increase. One quarter (26 percent) of mortgages we review include this violation.
- Double-dipping brokers. Within three days of offering a good faith mortgage estimate, brokers are supposed to reveal income to be paid outside closing, often referred to as the yield-spread premium. Unsavory brokers do not disclose the income to the borrower on the good faith estimate. The borrower finds out about the yield-spread premium at closing on the HUD-1, which he/she is paying for indirectly in the form of a higher interest rate.
- No documentation of income. Initially designed to help the self-employed, who don’t often have a paper trail to show income history, mortgages written with little, if any, documentation of the buyer’s income enable deceitful brokers to fill in false income data. This allows borrowers to qualify for larger loans and brokers to make higher commissions. One third (33%) of mortgages reviewed by us include this violation.
All of this means that you have a lot of leverage to achieve better terms for your current mortgage, as lenders and their counsel are well aware of these violations.