Two states that have laws against prepayment penalties are Texas and Vermont. These are good laws considering that many homeowners who default on their loans do so as a result running into financial trouble and losing their home because they could not pay off their loan early when they had the chance. Prepayment penalties discourage homeowners from making sound financial decisions that can affect their future and long-term financial security.
The biggest problem with prepayment penalties are that many of them are nondisclosed. That is, the mortgage company doesn’t tell the borrower about the penalty during the document preparation process. As a result, many homeowners find themselves paying huge penalties when they sell their homes and that may cause them financial hardship to such a degree that they can’t afford another home.
If you find yourself trying to sell your home and have been notified of a prepayment penalty, request a forensic loan audit. If the mortgage company has violated any federal law it may be in their best interest to waive your prepayment penalty or modify your loan to lessen or do away with it altogether.
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?
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.
The best tool that you can use to assist your legal clients from falling prey to a mortgage scam and risking the loss of their home due to a foreclosure is to request a loan document review from a professional forensic loan auditor. Trust me when I say that a comprehensive document review can provide more evidence of fraud or negligence on the part of your lender than anything else. If your client’s loan servicer is guilty of violating any of the loan’s contractual obligations then the loan document review will show it.
A good review, however, has at least three characteristics:
- It’s in writing
- Cites case law
- Is specific about the violations within the loan
Your forensic loan auditor should go over every detail of your client’s loan and point out every violation so that you have a basis for discussion and negotiation with the lending company and a foundation for accurate discovery should you need to litigate. If you have not ordered your loan audit today then now is the time.
During the loan document review there are a number of documents that your loan auditor will be concerned with. Obviously, your loan closing paperwork is the first place to start and that’s where the majority of the information you’ll need for an equitable loan settlement will be found. But there are supporting documents that will be helpful. Some of those include:
- Good Faith Estimate
- Truth In Lending Statement
- Verification of Employment
- Verification of Deposits
- Verification of Mortgages
- Tax Returns
- Bank Statements
- W-2s
- Credit Reports
- Real Estate Appraisals
- Title Commitment
That’s just to name a few. There are over 30 different documents that your loan auditor may be concerned with to help you identify areas for renegotiation with your loan. Your lender will not help you find the information. That’s why it is important to have a good relationship with your loan auditor, who is a third-party individual or business with no interest in your loan. He is there to make sure you get a fair shake in the loan. Who else is doing it?
Get more information on the Loan Document Review.