If you are a loan modification attorney it can get frustrating approaching a lender to request a mod on behalf of a client and being turned down. Worse yet, getting turned down and with no good reason offered. You have to go back to your client and deliver the bad news.
However, 83% of US loans are frought with lender violations of one applicable law or another. TILA, RESPA, HOEPA, a state law, ECOA, or one of over 80 laws that can be violated. Many of these violations provide your client with a right to rescission of their loan. Instead of facing foreclosure, your client could instead turn the tide of negotiation in their favor. And you’ll be hero.
It all begins with a loan audit. That’s where you can see if there are any violations of your client’s loan. Your loan auditor will provide you with a comprehensive report, detailing missing documents or other violations of your client’s loan and an analysis of what it may mean to your client financially and legally. Click the link to view a sample loan audit.
Your loan auditor can provide a comprehensive report and help you identify areas that are key negotiating points in the loan modification process. Get more information on the loan auditing process.
A forensic loan audit has the potential to disclose a variety of lender violations. There are about 80 different laws - federal, state, and local - that lenders must comply with when underwriting a mortgage loan. If they violate any one of those laws the lender faces a penalty, fine, or forced reimbursement of interest and principle. It could be costly for the lender.
Because the risk is so high for the lender and relatively low for the borrower, getting a forensic loan audit is one of the important things to do when seeking a loan modification. In fact, many lenders may turn you down for a loan modification request if there is no compelling reason to provide one. If you can show them that they’ve violated a law in their underwriting of a loan then that could be enough to get them to the negotiating table.
Once you get the lender to the negotiating them you’ve then got to convince them to give you terms that are favorable to you. Let your attorney do the negotiating. They often have more pull and can point out legal details that the lender’s attorney will hope you’ll miss.
At the end of the day, the goal is to keep your home and make it affordable for you to do so. A forensic loan audit can be an essential tool.
How long does it take to get a loan modification? Right now, because there is such a huge demand for loan mods, it could take a little while. In actuality, it only takes one day for the loan modification to happen, but prior to signing the contract, other things have to take place.
From the time that you request a loan modification from your bank to the day the loan mod actually happens could be 5-7 business days. That’s because the bank must approve you as if approving you for a first time loan and process the paperwork. They are also working other loan modifications during the same time.
Prior to requesting it from the bank, you should have forensic loan audit or document review done. That will another 5-7 business days. If you have a homeowner-client who is very distressed financially then they need to understand that it’s not an overnight solution. If the homeowner is caught up in the foreclosure process while pursuing a loan modification then the bank could come from the keys before the process is completed. That’s why you should contact the bank prior to initiation of the loan modification process (after you receive your loan audit) and inform them of your decision to pursue the loan modification. It is often wise to halt the foreclosure process before seeking the loan modification. Let the audit be your leverage.
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.
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.
When you are challenging the terms of your mortgage you want the best of two things: An attorney and a loan auditor. At least one of them should be a case law expert.
I am utterly surprised by the number of loan auditors today who couldn’t answer simple questions about mortgage case law. A good loan auditor will be thoroughly familiar with the Truth In Lending Act, HOEPA, RESPA, ECOA, and many other local, state, and federal laws that apply. Of course, your local laws will be different than those in another state, but your loan auditor should know where to go to find the most applicable laws.
Many lender violations can result in fines and penalties for the lending company. That’s why, if you have evidence that some of those laws were violated, even if by innocent error, it could save you thousands of dollars over the lifetime of your loan. Your payments could get lowered as well.
And since 83% of mortgages have violations in them, it makes sense to get a loan audit - just so you can sleep at night.
There are many types of mortgage or loan scams, but equity skimming is one of the most brutal and it is illegal. Many times, however, the perpetrators are never caught. Unfortunately for the victims, it can be very costly and usually ends up with depleted home equity accounts and sometimes even results in losing the house to the lender.
This is in contrast to fair and reasonable investing practices that allow homeowners to sell their homes to investors who then “flip” the home to another buyer and take the equity as their profit. This procedure is typically used when a homeowner is headed toward foreclosure and there is no other way out. The option is to lose the house and the equity to the lender while ruining one’s credit, filing for bankruptcy and still running the risk of losing the home later down the road if one’s financial situation does not improve, or losing only the equity because the homeowner has to sell for less than the value of the home. A homeowner in the right frame of mind would conclude that losing the equity is the lesser of all evils because it allows that homeowner to get back on his feet and possibly purchase another home when he does.
Equity skimming, on the other hand, does not end so happily. One version of this scam has the lender offering to refinance the home for homeowner and taking a piece of the equity for closing fees. The homeowner’s perception is that he has received more favorable loan terms, but he has paid for those terms in loss of real value. A few month’s later the homeowner finds himself in trouble again and the lender offers another refinancing option, paying for the closing costs with equity money - again. Two or three rounds of this ends up with the homeowner out of his equity and the lender forecloses on the property anyway because the homeowner’s financial situation has not changed. Now, the homeowner has no home, no equity, and bad credit.
If you feel that you are a victim of equity skimming then you could have a right to rescind your transaction with your mortgage company and receive damages. You could get your equity back! But before you can seek a remedy for your situation, you should seek legal counsel and request a loan audit from a professional loan auditor.
