What is a forensic mortgage audit?

A Forensic Mortgage Audit is the comprehensive review of all loan documentation including legal documents, transactional data, and other evidence pertaining to your real estate loan that has been funded. A forensic mortgage audit identifies any illegalities performed by the lender, their broker, or other parties in conjunction with the mortgage. During the audit process, skilled professionals review all documents received from your lender from the date you applied to the date you funded your loan including any envelopes, faxes and emails to ensure that your loan meets all legal requirements that were in effect at the time the loan was funded.

Why is a forensic mortgage audit important?

Loans must be legal to remain enforceable by the lender. Loan Violations are serious offenses of Federal Consumer Protection Law and lenders may face stiff fines and legal consequences for breaking these laws.

Mortgage bankers, banks and servicers are run by business people. They understand the financial ramifications of their mistakes and usually want to avoid expensive litigation or risk being charged with large fines. When their money is on the line, these firms can often be persuaded to more easily reach agreement with their borrowers.

If a loan was funded unlawfully, the borrower may be entitled to compensation, a refund of all interest and principal payments made for the last three years, all non-recurring closing costs, legal fees, or a renegotiation or modification of the terms of the loan. From 2000-2007, tens of thousands of loans were funded unlawfully. Your loan may be unlawful, and you may be entitled to substantial damages whether or not you're currently in foreclosure.

A forensic mortgage audit determines violations of the laws governing lenders.  An audit report provides a powerful tool for negotiating with your lender.  Whether you need your loan modified or you need to sell your home as a “short sale” or even if you need to have your loan rescinded, your lender will be motivated to work with you when you have evidence of their violations.

How does a forensic mortgage audit help a home owner?

Violations are the leverage used to present your case with your lender. The more violations discovered, the better your chances of obtaining a favorable settlement. The chances of a successful settlement increase with the most severe violations. 

What should a proper loan audit look for?

A thorough loan audit should look for:

1) Violations of Federal, State or Local Laws
The act of using your home as collateral in obtaining a mortgage is covered by numerous federal, state and local laws.  These laws are in place to protect your rights when you use your home as collateral in a mortgage transaction.  The audit professional will review your loan documents to determine if there are differences between the disclosure of information in your loan documents you received and the disclosure of information required by law.

2) 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?

3) Fraud and Negligent Misrepresentation
Were any representations, statements, or comments, written or oral made by the loan officer, broker, escrow or anyone else which contradicted the terms of the documents? 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.

4) Excessive Fees
Were there any excessive fees or improper charges made by the lender or loan broker? Are there any deceptive, abusive or predatory lending practices or an excessive prepayment penalty?  Is there a Net Tangible Benefit to the Borrower in the mortgage transaction?  Was there a proper analysis to determine if the Borrower can afford the payments on the loan? Were the fees properly disclosed?

5) Breach of Contract
The note and its attachments are a contract. The lender must follow all the terms of the contract such as the way the interest is calculated, and the penalties are assessed. Were there any terms in the contract which the lender failed to follow?

What happens if there are violations in my loan?

Once the loan audit determines that you may have been a victim of deceptive lending practices or any other type of mortgage compliance issue stated above, you have the leverage to fight your lender.

The course of action you should take is often dependent upon your current situation.  If you are not seriously delinquent on your loan, but have difficulty making your mortgage payments, you may want to consider the use of our loan modification partner to assist you in reaching an agreement with your lender to modify your loan terms.  A loan audit disclosing violations will certainly give you leverage you need to get the best loan modification.

If you have received a Notice of Default or are in Foreclosure, you should consider hiring an attorney who is skilled in consumer advocacy, predatory lending and real estate law.  If you need help in locating a skilled attorney, we may be able to assist you.

The attorney will reach a settlement agreement with the lender (most cases) or continue on to trial (rare situations) and demonstrate to a judge or jury how the lender has willfully failed to comply with Federal Law.

In most cases, it is NOT necessary for you to make mortgage payments while the lawsuit is pending, however placing your mortgage payment in a trust account will show good faith to the court as well as quickly add up for a sizeable fund to negotiate with, if needed.

It is also unlawful for the lender to report negative information about you to the Credit Reporting Agencies while the lawsuit is pending under the Fair Credit Reporting Act.

How can a loan audit stop a foreclosure?

If you are in foreclosure, the proper litigation can stop the foreclosure process immediately.   A loan audit disclosing violations will stop a foreclosure in its tracks.

The law gives a borrower a limited amount of time to act. If you wait, you may not be able to take action later.

How do I begin?

Here is an overview of how the Forensic Mortgage Audits (FMA) program works:

1. FMA will conduct a Forensic Loan Audit which scrutinizes the mortgage documents you received upon the closing of your loans(s) and look for TILA, RESPA and HOEPA violations by your lender. Once you receive your Audit, you will know what violations, if any, were committed in the handling of your loan. (statistically, nearly every loan has at least some violations) You can then decide if you should proceed to seek a remedy. If you do proceed,

2. You will either be referred to our partners who specialize in Loan Modifications using our audits as leverage or you will be referred to attorneys we work with who can immediately file a Federal lawsuit on your behalf.

3. Armed with our audit indicating the lender’s violations, the Loan Modification firm will negotiate with your lender for a reduced payment and even possibly a reduction of your principal balance.  Or, the Attorney will reach a settlement agreement with your lender using our audit to support your claim.  If the claim continues into trial our audit will demonstrate to a judge and jury how the lender willfully failed to comply with the law.

How do I contact FMA?

FMA can be reached at (916) 436-1247 or email to auditing@forensicmortgageaudits.com

 


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