Forensic Loan Audits


According to a recent report “As high as 83% of Federally supervised banks that made loans during the mortgage boom were cited for patterns of compliance violations”

Industries latest scam is charging homeowners that are facing foreclosure up-front fees for providing a Forensic Loan Audit to prevent foreclosure without having an attorney to defend them.  Such practices should be illegal. 


 

What is a Forensic Loan Audit?

A foreclosure defense that challenges Unfair Lending Practices is one of the best tools available to a foreclosure defense attorney. The attorneys and legal professionals that work with Charles P. Castellon can refer you to a Certified Forensic Loan Auditor. We recommend a credible third party to check your loan for compliance with Federal and State lending laws as a step in your foreclosure defense plan.

A Forensic Loan Audit is a useful tool for building a foreclosure defense case against the lender. While there can be great value in a Forensic Loan Audit, we caution against paying for this service unless you have discussed this strategy as part of your overall foreclosure defense. There are many scams so make sure you hire a lawyer before discussing an audit.  

The attorneys and legal professionals that work with Charles P. Castellon can advise you on whether a Forensic Loan Audit makes sense for your foreclosure defense plan.

How a  Forensic Loan Audit can help:

  • Give an overall picture of the loan from the time of you signed the papers. This includes how the loan was serviced and foreclosure fillings.
  • Gives your attorney valuable information about who the players were in making your loan. For example, a Forensic Loan Audit identifies the mortgage broker, real estate agent, appraiser, closing agent, the mortgage originator, mortgage holder, lender’s foreclosure attorney and other information that may help your case.
  • Teaches you how to think like a consumer, broker, lender, underwriter, service agency and an attorney.
  • An audit can identify which violations can hold up in court vs which ones can’t.

 

How can a  Forensic Loan Audit be used?

  • The borrower may assert that he or she is not in default because the lender was involved in misconduct concerning the underlying transaction; or
  • The borrower can assert that the UDAP claims against the lender offset the delinquent payments.

Forensic loan audit can uncover compliance problems with:

  • Unfair and Deceptive Acts and Practices Statutes (UDAP) UDAP statutes generally prohibit deceptive and unfair practices. A practice can be deceptive even if the defect is simply a failure to disclose the disadvantageous cost or nature of the loan. A practice can be deceptive even if the defect is simply a failure to disclose the disadvantageous cost or nature of the loan.

    In the context of defending against a foreclosure action, UDAP damage claims can be used in two ways:

    1) The borrower may assert that he or she is not in default because the lender was involved in misconduct concerning the underlying transaction; or
    2) The borrower can assert that the UDAP claims against the lender offset the delinquent payments.

 

What are the laws that protect consumers? 

There are a number of loan practices and terms that are prohibited under the following consumer protection acts. Contact a foreclosure defense counselor with Charles P. Castellon to learn if a Forensic Loan Audit is right for you.

The Truth in Lending Act (TILA)

The Truth in Lending Act (TILA) requires a creditor to disclose certain important information about the credit terms to the consumer in writing prior to consummation of a credit transaction.

The most important part of the TILA is called the right of rescission. It allows you to rescind, or cancel, some types of home loans and walk away without losing money.  The right of rescission is a three-day period when you can back out of a loan, no questions asked. Within 20 days, the lender must give up its claim to your property as collateral and must refund any fees you paid.  While the right of rescission may have long passed on your loan, it can be extended for up to three years if certain TIL disclosures were not provided correctly at the time of the original credit transaction or a proper notice of the right to cancel was not given.

Inaccuracies in certain disclosures are actionable only if they exceed tolerances set by the statutes. The tolerance for Finance charge is just $35.

The Home Ownership and Equity Protection Act (HOEPA)

Congress passed the Home Ownership and Equity Protection Act to addresses certain deceptive and unfair practices in home equity lending. It amends the Truth in Lending Act (TILA) and established new requirements for certain loans that have high rates and/or high fees.Whether a loan is a high-cost loan subject to these restrictions depends on whether it meets either of two triggers:

1) Annual Percentage Rate (APR); 
2) points and fees charged.

Real Estate Settlement Procedures Act (RESPA)

The purpose of RESPA is to protect the consumers from unnecessarily high settlement charges and certain abusive practices that have developed in the residential real estate industry. It attempts to achieve these goals by controlling the manner by which the settlement services are provided and compensated.

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