A pooling and servicing agreement outlines the rights and responsibilities of the trustee, servicer, and others involved in a pool of mortgage loans. So where do you find it? I’ll assume that you don’t know the name of the securitized pool of loans that you are looking for (otherwise it would quite simple).
Follow these steps to locate a pooling and servicing agreement:
- Go to http://www.sec.gov and look for a blue tab labeled “Filings & Forms”. Click on Search for Company Filings.
- Click the link labeled “Company or fund name, ticker symbol, CIK (Central Index Key), file number, state, country, or SIC (Standard Industrial Classification)”
- Type the name of the mortgage company in the Company Name field and click the Find Companies button>
- If you know the year your loan was serviced (and you should), look for an entry with that year in the title and click on that entry’s document number.
- Look for the document titled Prospectus and open it in HTML or Text.
- Look for the Pooling and Servicing Agreement section in the Table of Contents. In that section you’ll find information on closing dates and cut offs for the pool of loans in question. Other information in the Pooling and Services Agreement includes who has the right to modify a loan or negotiate with the homeowner. You’ll want to get to know that person.
- If this isn’t the right document for the loan you are attempting to modify, repeat these steps until you find the right Pooling and Servicing Agreement. It’s tedious work, but well worth it.
Get more information on the loan audit process at U.S. Lender Audit.
Many homeowners, when they face foreclosure, get desperate and end up selling their home for less than it is worth. They’ll either get taken in by the snazzy sales talk of a smooth talking real estate investor or attempt to short sale their own home in order to save their credit. Neither option may be necessary. Before you advise a client to sell for less in order to get out of a credit-killing foreclosure settlement, order a loan document review and know the facts.
A document review can uncover several key facts that will help you and your client negotiate a better settlement from the lender. Banks don’t want to own the property. They’ll just get stuck with it and it will be a liability for them, not an asset. That’s the last thing they want.
Instead, they’d rather help a homeowner stay in the home. But they don’t offer loan modifications on a silver platter. You or your client has to request it. And then you may not be approved unless you can show a compelling reason why it’s necessary. That’s where the loan document review comes in.
The document review will show you if the lender has violated any local, state, or federal law. Even minor infractions can be enough to win at the negotiating table. Some lender violations can result in heavy fines or refunds to the borrower. Therefore, a bank will willingly settle on amicable and equitable terms with the borrower rather than pay huge amounts of money for a small mishap. Wouldn’t you?
The Home Ownership And Equity Protection Act, better known as HOEPA, is a law that was passed in 1994. The Act amends TILA, passed in 1968. It’s primary focus is on high rate, high fee loans. The Act offers protections to consumers of loans above and beyond what TILA provides protection for.
HOEPA covers the following types of loans:
- First lien loan, which is the original mortgage, where the APR exceeds 8% of the rates for Treasury securities of comparable maturity
- Second lien loan where the APR exceeds 10% of the rates of T-securities of comparable maturity
- The total fees and points paid by the borrower exceed $583 or 8% of the total loan amount, whichever is higher
In addition to certain disclosures required by HOEPA, if a lender performs any of the following practices then that lender is in violation of your loan and there could be penalties, which may include a refund on your loan or interest amount.
- Balloon payments
- Negative amortization
- Default interest rates higher than pre-default
- Repayment schedule which consolidates more than two periodic payments paid in advance from proceeds of the loan
- Interest rebates calculated by any method less favorable than the actuarial method
- Due-on-demand clause
- The majority of prepayment penalties
- Loan money without consideration of your ability to pay
- Refinance a HOEPA loan into another HOEPA within the first 12 months
As you can see, these are pretty specific prohibitions. If you have a client that you think may have a HOEPA case, the best thing to do is to order a forensic loan audit, which will uncover any documentation to prove a lender is in violation of HOEPA.
The Truth In Lending Act (TILA) was passed in 1968 to protect borrowers from unscrupulous and predatory lenders who use bait and switch tactics and other under-the-table marketing tactics and downright dishonest business practices to bilk homeowners out of thousands of dollars by selling them mortgage products they don’t need and can’t afford. If you’ve been a victim of this then you understand why TILA is a necessary piece of legislation.
Since 1968, there have been numerous amendments to the act that provide further protection from homeowners and borrowers:
- Fair Credit Billing Act of 1974
- Consumer Leasing Act of 1976
- Truth in Lending Simplification and Reform Act of 1980
- Fair Credit and Charge Card Disclosure Act of 1988
- Home Equity Loan Consumer Protection Act of 1988
- Home Ownership and Equity Protection Act of 1994
- TILA Amendments of 1995
- Economic Growth and Regulatory Paperwork Reduction Act of 1996
Additionally, Regulation Z, the meat of TILA, was amended in 1987 and 1988.
Regulation Z outlines TILAs disclosure requirements for mortgage lenders and is one place where you’ll find many lenders are in violation of their mortgage agreements.
Prior to TILA, it was difficult for consumers to understand mortgage rates and terms because there was no requirement to format them in any certain way. TILA, however, made a standard for formatting mortgage terms so that borrowers could more easily determine the rates and know what they were getting into. If your mortgage company fails to provide you the correct format for your loan terms then they could be subject to fines and may be forced to refund you a part or all of the borrower’s loan.
It’s important to understand these case law nuances when seeking a loan settlement for a homeowner who may have a lender who has violated TILA.
Your most powerful negotiating tool is a loan document review. That should be the first thing they teach in loan modification school.
When you walk into a bank office or sit at the negotiating table with lenders and you carry with you a certified forensic loan audit performed by a professional team of loan auditors, you will be confident and have the ammunition you need to arrive at a fair and equitable loan settlement for your client. Sometimes, merely having the documents in your hand is enough to produce a confident walk and demeanor throughout the negotiating process. And negotiations tend to close sooner too.
When you have a lender who knows that his product was wrong yet sold it to the client anyway and that lender is faced with potential fines for his actions, a forensic loan audit can end negotiations quickly and in your favor. Most of the time you will not even need to litigate the case as it will be settled out of court long before the time.
A forensic loan audit is the most powerful negotiating tool because it often does the negotiating for you. All you need to do is sign on the dotted line and receive your payment.
California Senate Bill 94, passed in May of this year, requires third-party loan modification services to provide a written statement to customers prior to entering into any fee agreement the following statement, with the additional requirement that it be written in at least 14-point type bold font.
IT IS NOT NECESSARY TO PAY A THIRD PARTY TO ARRANGE FOR A LOAN MODIFICATION OR OTHER FORM OF FORBEARANCE FROM YOUR MORTGAGE LENDER OR SERVICER. YOU MAY CALL YOUR LENDER DIRECTLY TO ASK FOR A CHANGE IN YOUR LOAN TERMS. NONPROFIT HOUSING COUNSELING AGENCIES ALSO OFFER THESE AND OTHER FORMS OF BORROWER ASSISTANCE FREE OF CHARGE. A LIST OF NONPROFIT HOUSING COUNSELING AGENCIES APPROVED BY THE UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) IS AVAILABLE FROM YOUR LOCAL HUD OFFICE OR BY VISITING WWW.HUD.GOV.
The question is, Why and who does this protect?
It is obvious the statement is designed to protect lenders. ALL lenders. Not just the good ones. It also protects unscrupulous lenders who do not deserve the protection.
Think about this: If your lender has violated state or federal law by not providing you with the proper disclosures or has sold you a mortgage product that you do not need and is above your means to pay, what incentive do you have to contact that lender directly for a loan modification? Furthermore, if you do contact that lender and request a loan modification, how will that lender treat you? The following treatments are common among lenders who also agree to provide their customers with loan modification services:
- Charge clients for the loan modification - This begs the question: Is the mortgage company providing a modification to the loan to help the borrower or to make more money off the borrower? If your lender is providing a loan modification then it shouldn’t cost you anything.
- Force you to sign away your rights - Many lenders will not discuss loan modification with you until you sign a waiver stating that you will not sue them. If such a statement is necessary then the lender must be worried that there is a cause for litigation (and there probably is). Just as well, you have a right to seek justice and remuneration for any wrong done you by your lender. Therefore, we advise you not to sign such statements.
- Offer a less than adequate modification - While you may think that you are getting a fair deal from your lender, remember that your lender sold you a product that you didn’t need. Many lenders will provide you with a loan modification, but your new loan terms will not be as good as they could have been had you used a third-party negotiator and the leverage of a forensic loan audit.
Your best strategy for getting the loan modification that you deserve is to first request a forensic loan audit through an attorney that specializes in loan modifications. Your attorney can order the audit on your behalf, which will be thorough and comprehensive in scope and analysis. If your lender has violated any state or federal law (83% of all mortgages has some kind of violation in them) then your attorney can negotiate a better settlement for you. You’ll get a much better deal with a third-party negotiator who specializes in modifications backed by a loan audit that can be used as admissible evidence in a court of law.
Thomas Moems is one attorney that understands what RESPA Section 9 requires, or prohibits, from a mortgage company. I love what he says here in his final paragraph:
So, the moral of the story: If you are a seller and you require the buyer to use your favorite title company or closing agent, you are probably violating Section 9 of RESPA.
The law is pretty clear here. RESPA Section 9 explicitly states that
(a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.
Mr. Moems waxes poetic about what the definition of a federally related mortgage loan is. It pretty much means any type of loan that is not a construction loan. Yes, even your non-VA and non-FHA residential mortgage. And what is the penalty for violating Section 9 of the RESPA law
(b) Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance. 12 U.S.C. ยง 2608.
Emphasis is mine. Three times the amount paid for the insurance.
3 X
Let’s say it again. Three times the amount paid for the title insurance.
So any lender that includes a statement in your contract requiring you to purchase title insurance from a specific company is in violation of RESPA. And they don’t even have to do it directly. They can do it indirectly.
A forensic loan audit will be able to tell you whether or not your client’s lender is in violation of RESPA Section 9. If it is then you can use the evidence of that against the mortgage company and negotiate a loan settlement that will allow your client to keep his home.
When you ask for a loan audit or mortgage document review, there are certain documents that are always looked at. Then there are documents that may be exempted depending on the circumstances. The procedure for a document review includes:
- Credit report, unless the loan was a streamlined refinance or meets other underwriting exemptions
- Verification and re-verification requests
- Gift letters
- Mortgagor’s employment or other income
- Deposits
- Alternative credit sources
- Funding sources
- Mortgage and rent payments
There may be times when a re-verification of documents is necessary by telephone. Regardless, when a loan document review is complete, the loan auditor will have a good picture of the mortgagor’s situation at the time of lending and whether or not any predatory practices have taken place. But a thorough loan audit doesn’t just end with these verifications. It goes much further.
No one gives a loan audit like U.S. Lender Audit. If you’d like to see a few sample audits, we can provide them. Check these out:
Loan Audit No. 1 - Shows a missing Good Faith Estimate, Title Policy, Escrow Analysis, and several other documents. With possible violations of TILA, RESPA, FACTA, state requirements, and the Privacy Act, this loan audit gives a detailed overview of where the borrower’s mortgage company went wrong.
Loan Audit No. 2 - This loan audit shows a missing Title Policy, Right to Rescission Notices, and High Cost Mortgage Disclosures. These are required documents for some loans and this audit shows that there could be TILA violations that could work favorably toward the borrower.
These are just two examples of the comprehensive and accurate loan audits that are available to you as you seek a loan settlement for your client. Learn more about U.S. Lender Audit loan audits.
The Truth In Lending Act of 1968 gave every consumer of mortgage products a right to rescind their loan under certain conditions. A rescission is a voiding of your contract. Straight from the Act itself:
When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void, and the consumer shall not be liable for any amount, including any finance charge.
Your right to rescission is absolute. There are certain and specific conditions that allow a borrower to rescind their loan. Furthermore, your lender must include a right to rescind disclosure statement with your closing documents - two copies.
The only time you do not have a right to rescind your loan is when you waive that right. From the Act:
The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer shall give the creditor a dated written statement that describes the emergency, specifically modifies or waives the right to rescind, and bears the signature of all the consumers entitled to rescind.
It’s important to realize that if you exercise this waiver then you are giving up any future rights to rescind your loan. That means if you have just cause to rescind then you can’t. Before you sign a waiver of your rights, get a forensic loan audit to determine if your lender has violated any local, state, or federal laws with regard to your loan. If so then you’ll want to rescind your loan and/or seek to modify it.