The Home Mortgage Disclosure Act, or HMDA, is a piece of legislation passed in 1975 that requires lenders to report public loan data. The public data is used to ensure that lending institutions are meeting the requirements of the law and meeting the needs of their housing communities.
The Federal Financial Institutions Examination Council (FFIEC) compiles the data from reporting institutions and that data is used to determine trends in lending. Tables are created for each Metropolitan Statistical Area. You can find this data on the FFIEC website.
As an example, the FFIEC website offers a table showing reasons for refinance denials. While this information doesn’t show specifics regarding individual cases, it could shed some light on general trends regarding lending habits and that could help you in your negotiations with specific lenders or in cases of litigation where lender violations are an issue.
The FFIEC website is a great place for additional research in pursuing the rights of homeowners.
If I were a banker and I told you that I was going to fix a violation so that you don’t have to worry about it, would you let me? The law is quite clear on this point. A lender cannot fix a violation in retrospect. And if you don’t believe me then at least take the word of a banker:
You can’t fix this type of violation. You have closed the loan and advanced the money so the best option is to document the error, train the loan officer(s) and move on. Do not rewrite the loan because the customer has the right to rescind this loan because of the HOEPA violation. If you rewrite the loan, you are only trying to take away their rights. Courts have shown this is not acceptable and you can’t take away someone’s rights.
This applies to HOEPA violations as well as RESPA and TILA violations. A bank or lending institution cannot fix a violation or rewrite the loan. You have a right to rescission under federal law and if the bank rewrites the loan without your knowledge or permission they are taking away your rights. If that happens to you then we recommend finding an attorney who specializes in real estate and mortgage law. They’ll be able to help you identify lender violations and other red flags.
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.
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 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.
The purpose of truth in lending laws are pretty straightforward. From the Truth In Lending Act itself:
The purpose of the Truth In Lending Act is to require a meaningful disclosure of credit terms so that the borrower will be able to compare the terms of different loans available to him and to protect the consumer against unfair lending practices.
It is only right and fair that consumers of mortgage loans know in advance what they are getting into. Hidden fees and secret punches ought to be discouraged. But they happen anyway, even with strict laws.
One of the primary ingredients of the truth in lending laws in place is that lenders must disclose in writing the exact nature and amount of your fees, loan amount, and finance charges. Failure to do so can result in huge fines and financial remedies for the borrower.
The test for most truth in lending violations is “bona fide and reasonable”. That means market rate is a necessary consideration. It doesn’t mean that every lender must offer the market rate on loan amounts and charges. It does mean that huge gaps between the market rate and the actual charges could be terms for dispute or litigation. If that seems vague, it’s because it is. The law does allow for some flexibility in product offerings for the sake of competition, but it doesn’t allow for predatory or unscrupulous lender practices.
If you feel like you have a truth in lending claim then a loan audit can help you identify any violations that can give you legal recourse.