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| Scope of the Audit
Certified Forensic Loan Auditors' Evaluation for Violations of “RESPA”
The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. It requires lenders to give a good faith estimate (GFE) of all closing costs that borrowers must pay. It was designed to help borrowers from being forced to pay “hidden fees” at closing. Typical violations of RESPA include (1) Statutory Damages, (2) Attorneys fees, and in many cases (3) Treble Damages [i.e. 3 times the amount.]
Certified Forensic Loan Auditors' Evaluation for Violations of “TILA” The Truth in Lending Act (TILA) requires lenders to disclose the terms of a loan, including the total amount of the loan, the annual interest rate, and the number, amount and due dates of all payments necessary to repay the loan. The TILA also requires additional disclosures and places many restrictions on mortgages. The most often sought remedy under TILA is rescission of the loan.Certified Forensic Loan Auditors' Evaluation for Violations of “FCRA” The Fair Credit Reporting Act (FCRA) was designed to prevent inaccurate or obsolete information from entering or remaining on a credit report. The law requires credit bureaus to adopt reasonable procedures for gathering, maintaining and disseminating information. Commons remedies for violating FCRA are (1) statutory damages and (2) Attorney feesCertified Forensic Loan Auditors' Evaluation for Violations of “ECOA” The Equal Credit Opportunity Act (ECOA) was designed to ensure that all qualified people have access to credit and prohibits discrimination based on sex, marital status, age, race, national origin, or public assistance benefits received.Certified Forensic Loan Auditors' Evaluation for Violations of “HOEPA” Home Ownership Equity Protection Act state and local high costs. Federal (HOEPA), state and local high cost thresholds. Certified Forensic Loan Auditors compares the loan data collected during a forensic loan audit to the calculated high cost thresholds as defined by the Home Ownership and Equity Protection Act (HOEPA) and applicable state and local jurisdictions.Certified Forensic Loan Auditors' Evaluation for Violations of If an underwriter has evaluated the loan properly, then there should be no question of the ability of the borrower to repay the loan. Debt ratios will have been evaluated, credit reviewed and a proper determination of risk made in relation to the loan amount. Approvals and denials would be made based upon a realistic likelihood of repayment. Certified Forensic Loan Auditors' Evaluation for Violations of While such disregard of basic principles of loan underwriting lies at the heart of predatory lending, a variety of other practices may also accompany the marketing of such credit. Targeting Targeting inappropriate or excessively expensive credit products to older borrowers, or to persons who are not financially sophisticated or who may be otherwise vulnerable to abusive practices, and to persons who could qualify for mainstream credit products and termsLoan Flipping & Equity Stripping Repeated refinancing of borrowers into loans that have no tangible benefit to the borrower. Can be the same lender or different ones. Loans and refinances whereby equity is removed from the home through repeated refinances, consolidation of short term debt into long term debt, negative amortization or interest only loans whereby payments are not reducing principle, high fees and interest rates. Eventually, borrower cannot refinance due to lack of equity.High Debt Ratios This is the practice of approving loans with high debt ratios, usually 50% or more, without determining the true ability of the borrower to repay the loan. Can often be seen with Prime borrowers approved through the Automated Underwriting Systems.High Loan to Value loans Loans offered to a borrower having little or no equity in the home. Usually adjustable rate mortgages that the borrower will not be able to refinance out of when the rate adjusts due to lack of equity.Fraudulently Caused to Execute Loan Documents Adjustable rate mortgage loan was an inter-temporal transaction on which Plaintiffs had only qualified at the initial teaser fixed rate, and could not qualify for the loan once the interest rate terms change.Deception, Fraud, Unconscionable Is marketed in a way that fails to fully disclose all material terms. Includes any terms or provisions which are unfair, fraudulent or unconscionable. Is marketed in whole or in part on the basis of fraud, exaggeration, misrepresentation or the concealment of a material fact. Includes interest only loans, adjustable rate loans, negative amortization and HOEPA loans.Stated or No Income/No Assets Is based on a loan application that is inappropriate for the borrower. For instance, the use of a stated-income loan application from an employed individual who has or can obtain pay stubs, W-2 forms and tax returns.Lack of Due Diligence in Underwriting Is underwritten without due diligence by the party originating the loan. No realistic means test for determining the ability to repay the loan. Lack of documentation of income or assets, job verification. Usually with Stated Income or No documentation loans, but can apply to full documentation loans.Inappropriate Loan Programs Is materially more expensive in terms of fees, charges and/or interest rates than alternative financing for which the borrower qualifies. Can include prime borrowers who are placed into subprime loans, negative or interest only loans. Loan terms whereby the borrower can never realistically repay the loan.Mandatory Arbitration Clauses Pre-dispute, mandatory, binding arbitration clauses limit the rights of borrowers to seek relief through the judicial process for any and all claims and defenses the borrower may have against the mortgage lender, mortgage broker, or other party involved in the loan transaction.Certified Forensic Loan Auditors Evaluates Each File for Violations of “Common Law Principles” 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?FRAUD AND NEGLIGENT MISREPRESENTATION Were any representations, statements, or comments, written or oral made by the loan officer, broker, notary or anyone else who contradicted the terms of the documents? NEGLIGENT MISREPRESENTATION 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. BREACH OF CONTRACT The note and its attachments are a contract. The broker must follow all the terms of the contract such as the way the interest is calculated, and the penalties it assesses. Were there any terms in the contract which the lender failed to follow? BREACH OF FIDUCIARY DUTY And many, many, more……. |
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