Loan Auditors

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.

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.