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Posts Tagged ‘forensic loan audit’

Forensic Loan Audits is another tool underwater and delinquent borrowers are using to fight foreclosure. The idea is that you find problems with the mortgage documentation and use this to pressure the lenders into a loan modification or other outcome favorable to you the borrower.

During the height of the housing boom, not only did lenders get careless with who they would lend to, but also with following the RESPA and TILA regulations. RESPA, Real Estate Settlement Procedures Act, mandates improved disclosures (and timelines for those disclosures) for real estate transactions, such as the good faith estimate of closing costs and the HUD statement. The serving transfer notice you get when your bank sells your loan to another is part of RESPA. TILA, the Truth in Lending Act, governs disclosures about the cost of credit, such as the APR (annual percentage rate).

A forensic loan audit may find violations of RESPA and TILA. However an recent article by Marilyn Bowden is finding that even though 98% of loan audits find violations, it doesn’t buy you much. For one thing pursuing this with your lender is a legal matter with all the costs that come with that, including litigation. Another is that the lenders are not really responding to the legal pressure. Think about it, you are in a long line of people threatening to sue the bank.

However, comments on the web indicate some success when the bank can’t produce the mortgage documentation at all. With the dicing and repackaging (securitization) of mortgages done for the now hapless investors, some mortgages may have gotten lost and that might be something worth hiring a lawyer for.

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