Loan Auditors

It helps, if you want to win a case, to know the definitions of the terms you are going to use. A wise man once said, he who defines the terms controls the conversation. Well, to better understand what a loan violation is, you have to understand the case law behind lender practices and know what is permissible. But even then, just knowing the law isn’t enough. You also have to search out the documents that law pertains to.

A forensic loan audit is the only sure way to know where loan violations are within a mortgage document. Most of the violations that occur in a loan will be in the closing documents. That means you need three things:

1. The borrower’s copies of mortgage documents
2. A list of all applicable laws and associated penalties
3. A loan auditor to review the documents and analyze them to identify the violations

A professional loan auditor will perform a comprehensive document review and outline all the problem areas in the loan. If there are any loan violations then the forensic loan audit will uncover them. A reputable loan auditor will refund your money if no violations are found. You can’t beat that.

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. § 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.