Negotiating a Loan Modification with your lender is not an easy task. We invariably feel we are at a disadvantage when dealing with a large corporation or wealthy investor. However, you might have more tools at your disposal than you think. This article looks into the power of forensic loan audits and how they can be used to create extra leverage for our loan modification application, or as the title states: to speak softly with a big stick.
The idea behind using a forensic mortgage loan document audit is to get lenders on your side, albeit with a little arm twisting. A forensic mortgage loan audit checks your loan documentation for any federal or state violations or errors. Evidence shows that most loan mortgages have significant violations. Once violations have been documented they can be used to take a lender to court and in some cases get the loan cancelled.
How do you carry out a forensic loan audit?
First, you need data to work with. You need all your loan documents. The process starts with a Qualified Written Request, a QWR. This is a formal request for copies of your loan documents. Your lender is required by law to produce these documents and pronto. The documents that are requested include:
- An Initial Loan Application and Final Loan Application.
- Deed of Trust
- Truth in Lending Statements
- Good Faith Estimates
- Copy of Loan Payment History
- Grant Deeds
- Title Report
- Itemization of Amount Financed
- All fees incurred, escrow account disbursements and details on how payments were calculated.
The list goes on and should be as thorough as possible. The more documents you revise the more chances you have to find a violation in procedure.
Second, an audit must be carried out on your loan. There are many mistakes and violations that can be discovered by a forensic audit. These include violations to the Truth in Lending Act (TILA), usury violations, misleading disclosures, overstated home values, predatory lending, and lack of good faith estimate compliance, to mention just a few.
How does this help? If I violation is discovered, however serious you get leverage with your lender. If for instance you are overcharged, even by a small amount, or the annual percentage rate (APR) is a fraction higher than what you were told, your lender could be in breach of the Truth in Lending Act. This will make your lender feel much more motivated to giving you a beneficial loan modification.
Carrying out a forensic loan audit is not a simple task. Unless you have experience in loan modifications and Real Estate law you are probably better off contracting the services of a lawyer. This will of course cost money, but the return on your investment could be well worth it if it helps you get the loan modification you need.
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Negotiating a Loan Modification with your lender is not an easy task. We invariably feel we are at a disadvantage when dealing with a large corporation or wealthy investor. However, you might have more tools at your disposal than you think. This article looks into the power of forensic loan audits and how they can be used to create extra leverage for our loan modification application, or as the title states: to speak softly with a big stick.
The idea behind using a forensic mortgage loan document audit is to get lenders on your side, albeit with a little arm twisting. A forensic mortgage loan audit checks your loan documentation for any federal or state violations or errors. Evidence shows that most loan mortgages have significant violations. Once violations have been documented they can be used to take a lender to court and in some cases get the loan cancelled.
How do you carry out a forensic loan audit?
First, you need data to work with. You need all your loan documents. The process starts with a Qualified Written Request, a QWR. This is a formal request for copies of your loan documents. Your lender is required by law to produce these documents and pronto. The documents that are requested include:
- An Initial Loan Application and Final Loan Application.
- Deed of Trust
- Truth in Lending Statements
- Good Faith Estimates
- Copy of Loan Payment History
- Grant Deeds
- Title Report
- Itemization of Amount Financed
- All fees incurred, escrow account disbursements and details on how payments were calculated.
The list goes on and should be as thorough as possible. The more documents you revise the more chances you have to find a violation in procedure.
Second, an audit must be carried out on your loan. There are many mistakes and violations that can be discovered by a forensic audit. These include violations to the Truth in Lending Act (TILA), usury violations, misleading disclosures, overstated home values, predatory lending, and lack of good faith estimate compliance, to mention just a few.
How does this help? If I violation is discovered, however serious you get leverage with your lender. If for instance you are overcharged, even by a small amount, or the annual percentage rate (APR) is a fraction higher than what you were told, your lender could be in breach of the Truth in Lending Act. This will make your lender feel much more motivated to giving you a beneficial loan modification.
Carrying out a forensic loan audit is not a simple task. Unless you have experience in loan modifications and Real Estate law you are probably better off contracting the services of a lawyer. This will of course cost money, but the return on your investment could be well worth it if it helps you get the loan modification you need.
Related posts:
Forensic Loan Auditing is a fancy way of describing a thorough revision of the documents you signed when applying for your loan. This includes the accuracy of the math in the interest rates and payments schedule, the legality of the terms of the loan and any proof that you were misled in some way.
Why is Forensic Loan Auditing useful?
Forensic Loan Auditing is useful because if your mortgage did not comply with the Federal Guidelines for lenders at the time of signing there is a chance your mortgage was illegal, or at the very least non-complying. This can cause your mortgage to be void and your loan to be wiped out. Admittedly this does not happen all that often, but you can see why servicers and lenders take a Forensic Loan Audit very seriously.
If you took out your mortgage a few years ago, before the current financial crisis, it is likely your loan fails Federal Guidelines on some level. In boom years, like those we had three or four years ago, banks and servicers are very relaxed with their interpretation of Government guidelines. This is especially the case with laws relating to RESPA, TILA or the infamous section 32.
How To Carry Out A Forensic Loan Audit?
There are two ways, the easy but expensive option and the difficult but cheap route. It all, of course, depends if you do it yourself or employ a professional.
Because of the number of loans in trouble forensic loan auditing is becoming a booming industry. However, don’t be quick to believe those that say you can’t d it on your own?
This is what you will need to do:
1) Check the date you signed your loan documents.
2) Check the Federal Loan Guidelines for that period.
3) Compare them with the terms you accepted and the documentation you signed.
The responsibility for any illegal procedures falls on the lender and/or servicer that are required to follow current law, so if you find any discrepancies it could provide you with extra leverage against your bank when asking for a loan modification or even make the loan void if serious mistakes were made.
Lawyers will of course happily do all the work for you, and are likely to do a much better job. However they don’t come cheap. Some loan modification companies include forensic loan auditing as part of their service. Nevertheless make sure you check the costs of using a loan modification company because the Government has provided free counseling companies that are just as good if not better than any paid service provider.
Forensic Loan Auditing is not the Holy Grail of Homeowners but can be a useful tool for certain loans in providing leverage against unhelpful banks and in rare cases even cancel the debt on your mortgage.
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