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Question: What is a mortgage or forensic loan audit?
Answer: Mortgage loan audit or forensic loan audit is a review of the loan documents to determine if there are violations of federal laws such as Real Estate Settlement & Procedures Act (RESPA) and Truth in Lending Act (TILA). It is also used to determine if the borrower is a victim of predatory lending. If violations are found these are very effective tools in negotiating for loan modification. Based on recent survey, about 83% of loans have violations of federal laws. If your loan has violation, then a loan modification is a win-win situation for both the borrower and the lender. The borrower can request reduction in interest rate and principal. The lender will be happy to grant modification because they will be able to avoid more expensive litigation costs and possible penalties.
Question: Will lender be willing to modify the loan if there are federal law violations?
Answer: Lenders are not required to modify a loan. However, if there are federal law violations and you are represented by an attorney, they will look at the possible penalties and costs associated with litigation and are more likely to modify the loan.
Question: What are the examples of federal law violations and the corresponding penalties?
Answer: Examples of federal law violations by broker or lender are:
1. Constructive fraud. There is constructive fraud if a broker or loan officer or anyone working for the loan officer or broker failed to disclose to the borrower any material fact in the terms of the loan such as prepayment penalties or change in interest rate and corresponding Annual Percentage Rate during the loan process.
2. Failure to include an expense in the computation of APR in the Good Faith Estimate.
3. Fraud in underwriting of the loan, appraisal of the property or in the loan application.
If there is a finding of predatory lending, the borrower is entitled to complete relief of rescission. This means the loan will be taken back by the lender and return to borrower all interest payments, service fees, penalties and attorney’s fees. In many cases however, the lender and borrower mediate the case and allow the loan to be modified to a more favorable terms to the borrower.
Question: Who may qualify to loan modification?
Answer: You may qualify if you have any of the following:
Your Mortgage Loan is substantially more than the value of your home.
Your loan is an Adjustable rate mortgage (ARM)
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