Forensic Loan Audit To Uncover Errors On Home Loan

Lenders and servicers have been using forensic loan audits on pools of mortgages for a few years now with the aim of finding patterns of non-compliance with federal and local regulations, the existence of fraud, and/or the testing of high fee infractions. Sadly, the practice of forensic loan auditing has spread to the consumer side of the market and is now being utilized against these very lenders.

Homeowners, many of whom are in foreclosure proceedings, have started employing forensic loan auditors to examine their loan documentation. If violations are discovered, they hire lawyers to file claims against the lenders. What do they anticipate gaining? The homeowners are at least attempting to avoid foreclosure, pursue a loan modification, or, at the extreme, seek to have the loan canceled.

As the mortgage market collapsed some years back, the forensic loan review as we know it today emerged. For the investor or servicer to return the loan to the originator, the forensic review’s goal was to find any representations and guarantees that had been broken. At that time, all the major banks scrutinized non-performing assets for evidence of fraud or other violations to return them to the company that sold the loan.

When small correspondent loans were defaulting, banks would hunt for any information in the loan paperwork to attribute the default to the tiny correspondent from whom they had purchased the loan.

The forensic loan audit informs the homeowner of any fraud or deception and any violations of the Real Estate Settlement Procedures Act (RESPA) and the Truth In Lending Act (TILA) in the closing paperwork.

A forensic loan audit is a comprehensive risk assessment audit carried out by experts with industry and legal qualifications to review loan documents and portfolios for potential compliance or underwriting violations and provide an informative, accurate loan auditing report outlining errors or misrepresentations.

A compliance analysis report based on information from the actual file, post-closing underwriting review and analysis, a summary of applicable laws, current case law, and action steps that the attorney or loss mitigation group may choose to take is some components of a forensic loan audit.

In some court proceedings, the plaintiff must demonstrate during the initial litigation that they are qualified to obtain refinancing. What happens if a rescission is approved by the court but the consumer cannot secure financing? Oddly, no one knows this because legal battles haven’t gone that far.

Every single one of these situations is settled. The overburdened loan servicers are scrambling to devise as many loan modifications and workouts as possible, and the borrowers are fighting to get their attention. If you arrive with an attorney and a forensic loan examination and declare, “Here is a TILA violation; we want to rescind,” you may be able to get to the front of the queue.

It expedites the time it takes to present the settlement offer. It’s not like the lender wouldn’t have made an offer if the audit hadn’t occurred. Simply put, it tends to speed up the procedure a bit more. Forensic loan audits reveal errors and dishonest lending practices, which will help the borrower during negotiations.

The worst fear of all may not be the lawsuits filed by individual homeowners but rather the large law firms that track down each individual and join them in a class action lawsuit. The plaintiff’s bar is busier than ever. They have these huge dragnets, attempting to capture all the wrongdoing of mortgage bankers, coming after them with class-action lawsuits.

What Benefits Can Forensic Loan Auditing Bring to My Illinois Foreclosure Case?

It might be thrilling to purchase your first house. Still, taking on such a big responsibility can also be intimidating. Whether single or married, it’s crucial to carefully assess your mortgage and how much debt you can handle. Numerous people have been temporarily or permanently fired from their jobs because of the COVID-19 pandemic. Even though they could be eligible for unemployment benefits, the sums might not be enough to pay their monthly mortgage.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides federal safeguards for landlords and mortgage loan borrowers. However, suppose they cannot find employment again once this moratorium expires. In that case, homeowners might still find it difficult to make ends meet. Any legal violations pertaining to the loan package might be discovered with the aid of forensic loan auditing. Suppose this particular form of auditing can aid in your defense against foreclosure. In that case, an experienced lawyer can help you identify that.

Detection of Infractions in Your Loan Package

To ensure that customers are given correct information when they engage in credit transactions, the federal government developed the Truth in Lending Act (TILA). Mortgages, home equity loans, and credit cards are all covered under TILA. Lender disclosures ought to be uniform and standardized, but sadly, this isn’t often the case. If the creditor fails to provide the borrower with the necessary information, the borrower may sue for damages.

Any of the following are instances of common loan violations:

• A creditor breaches the Truth in Lending Act when they fail to provide written information about the terms of a loan or other type of credit transaction.
• HUD infractions: The U.S. Department of Housing and Urban Development (HUD) governs the housing sector. Housing providers, such as landlords or management firms, violate the law if they refuse to rent or sell homes to anyone based on race, color, nationality, religion, sex, familial status, or handicap.
• Interest rate violations: It may be a violation when the details of your loan, such as the interest rate and structure (fixed, adjustable, or balloon), are not completely disclosed. Many first-time homebuyers are unaware that their mortgage payments may significantly increase once the term is over.
• Abusive lending techniques: Lending institutions occasionally act unethically to win clients. This could be levying exorbitant or hidden costs, withholding crucial information, or failing to advise borrowers of their right to cancel a loan.

An attorney can aid you in challenging your house foreclosure by identifying the aforementioned infractions and holding those responsible. You can also be qualified for treatments like loan modifications or mortgage relief programs in certain circumstances.