When it comes to foreclosure defense, there’s only one real sure way to win the case. It’s probably not what you think.
Your first option is to hope the bank forgets about your client and they can keep the home no matter what. But hope isn’t a plan so you might as well stop that one dead in its tracks.
You could, of course, instruct your client to sell his property to the highest of the low bidders. They call themselves real estate investors. They go around to distressed homeowners and make offers on their homes that would make a dead real estate agent roll over in his grave. And the sad part is they usually walk away with the deal. It’s a win for the investor because the homeowner takes a big loss, which they perceive as a lot better than losing the house to the bank. It’s not the best deal, believe me.
Another option is to short sale the home. Again, your client will be taking less than fair market value for the home just so they can keep their credit clean. Not really a deal, is it?
Seriously, your best foreclosure defense option is to seek a loan modification. 83% of all mortgages have lender violations in them. In essence, the lender has just walked up to you with a silver platter and handed you a gold nugget. Take it. Perform a forensic loan audit and uncover those violations. Once you know where the lender has failed to comply with the law - whether intentional or by oversight - you can pound the nail into the stake. Approach the lender with your negotiation offer and close the deal. Your client keeps the house and pays less each month to boot. Now that’s a deal!
You know your sick and tired of your mortgage company sending you threatening letters. Now it’s time to do something about it. The latest statistics show that 83% of all mortgages have violations in them. And you might be wondering, “What’s a violation and what does it mean?”
Essentially, it means your mortgage company broke a law. There are case laws that offer specific requirements for mortgage companies to follow and if they don’t follow those requirements then there are penalties. In some cases your mortgage company could be required to refund you some of your money. Here’s what you do:
- Hire an attorney that specializes in loan modifications
- Have your attorney order a mortgage document review
- After your review reveals violations to any applicable state, federal, or local laws, authorize your attorney to meet with your mortgage company to negotiate a loan modification
Pretty simple, right?
It is simple, but there are complex laws that require certain documentation of your mortgage company. The mortgage document review is the one tool that can show any violations, giving you the evidence you need to win in court and/or seek a more fair and equitable mortgage agreement. A qualified attorney can help, but you’ll need the document review to be your leverage.
As an attorney working in the loan modification issue and helping homeowners achieve a fair and equitable loan settlement, you’ve got to be familiar with applicable local, state, and federal case law. As you know, many times precedent rules. But precedent is based on written law. And when it comes to written law, there are plenty of applicable Acts, Statutes, and other legislation to help you get the best settlement for your client.
- TILA - Truth in Lending Act. Passed in 1968. Designed to help protect consumers who fall victim to predatory lending practices and requires certain disclosures for any loan or mortgage company to issue to potential borrowers with stringent timelines.
- RESPA - Real Estate Settlement Procedures Act. Protects consumers of HUD financing and requires certain disclosures and prohibits kickbacks for loan services.
- HOEPA - Home Ownership And Equity Protection Act. Passed in 1994. Amends TILA. Requires further disclosures with stringent timelines when a consumer is applying for a high rate, high interest loan. Designed to protect consumers who borrow against their home equity.
- ECOA - Equal Credit Opportunity Act. Designed to protect minorities from discrimination practices in lending.
- Gramm-Leach-Bliley Act - Passed in 1999. Also known as Financial Services Modernization Act. Restricts information lending institutions can hold on its customers and strengthens consumer privacy.
- State And Local Laws - Many states and local governments have their own laws that are even stricter than federal law. If you practice law in those states then you should be familiar with applicable local laws and know how to use them to protect your clients.
If you are working on a loan settlement case then you’ll need evidence to act as negotiation leverage. The best tool to gain that leverage is a forensic loan audit.
Lenders in violation of the Truth In Lending Act are not always nefarious scoundrels and unscrupulous snakes. Sometimes a mortgage company simply miscalculates a finance charge and that miscalculation becomes a part of your mortgage documentation. It may not even be found for years, if at all.
Nevertheless, it could mean a refund of all of your finance charges if it is found.
Even if the financial error is a mere $25, you could end up with a refund of your interest payments even if you’ve paid in thousands of dollars in finance charges. With your right to rescission you can make a right wrong, but you should prepare yourself with a second mortgage because if you win your case and your loan is rescinded you will still have to pay the principal balance on your home.
Let’s say, for instance, that you buy a house for $250,000. After two years of making steady payments you’ve paid out $27,000 in interest. You’ll still be in the hot seat for the principal balance of the home so subtract your interest refund from that - $223,000 - and you’ll need a new loan for that amount. You’d better have that lined up with a new lender before the end of your day in court because once the loan is rescinded, it’s a done deal.
This is where you need to seek legal counsel. And make sure you choose an attorney who specializes in loan modifications.
With 83% of mortgages consisting of some type of lender violation, you’d think there’d be a swarm of loan settlements coming in. But there’s not. That’s because most borrowers aren’t aware of the violations that could get them a refund, a nice size loan settlement, or a modification to their home loan. As their attorney, it is your job to educate them.
Of course, you know that.
But have you considered a forensic loan audit?
The forensic loan audit is your ace in the hole. It’s the one tool that is nearly fail-safe in producing the evidence you need to win your case - and your client a loan settlement. With a forensic loan audit that is thorough and comprehensive, you can be sure that your clients are aware of the disclosures they should have received and know which ones they didn’t. Or if there are other issues such as TILA violations then you can help your client seek the remedy they are due.
As a loan modification attorney, you are the one person who can bring your client, a borrower, into contact with justice and relief from predatory lenders. But you need the right tools and your best tool is the forensic loan audit. It doesn’t lie.
What’s the best foreclosure defense? Experts will tell you that a loan modification is the best way to defend oneself against foreclosure, but there’s more to it than that. The truth is, an attempt to modify a loan without first getting a professional forensic loan audit will almost always end with a less-than-adequate loan settlement for the borrower.
You can prevent being taken to the bank by your lender by first seeking a qualified attorney to represent you and then asking your attorney to get you a professional audit.
No homeowner would think of buying a home without first having it inspected by a qualified home inspector. Why then would you consider a loan modification without first getting the evidence that proves you need one? Better yet, why would you seek a loan modification without getting the leverage you need to negotiate a fair settlement?
So, to answer the question: What’s the best foreclosure defense? Answer: A forensic loan audit in capable hands.
More and more I see forensic loan audit software popping up, with upstart loan modification companies peddling the latest digital elixir. I have a stern word of warning: Buyer beware!
Our real simple philosophy is no computer, no robot, no software program of any kind will ever perform a loan audit as well as human eyes can. Some of these companies simply scan in your mortgage documents and tell the software program to search for violations. Unfortunately, machines can fail. And they only do what you tell them to do. So if you ask the software package to search for the big problems it will likely find them. But what about the small problems?
The best, most comprehensive, most accurate forensic loan audit in the world is done by human eyes. As it should be.
It’s not that there isn’t a place for computers or software programs in the mortgage industry, or loan modifications, but they can’t replace humans. It’s a lot like sending a robot in to court to make your arguments for you. Who do you think would win?
Forensic loan auditing is catching on like a wave. That’s both good and bad.
The good is that homeowners now have a tool that will allow them to fight back against unscrupulous lenders and predatory mortgage companies and win in court or meet at the negotiating table and walk away with a fair and equitable loan settlement. That’s the good. But what is the bad?
Any time you have a large group of people focused on a single activity or even there will be another group of people preying upon them. Forensic loan audits have allowed homeowners to fight predatory loan sharks, but spam companies are popping up left and right claiming to be loan auditors and preying upon innocent homeowners, sometimes cheating them out of thousands of dollars and still causing the homeowner to lose their home or sign away their rights.
When you seek a forensic loan audit for your client, look for an honest, reputable company with a track record. Find one that offers comprehensive and accurate loan audits and offers a guarantee.
When it comes to abusive loan practices, the mortgage industry isn’t light on hucksters and predatory lenders willing to step up and offer a full plate of borrower abuse. That’s not to say that every lender is a bad guy. But a savvy attorney needs to know how to spot a predator and how to defeat him.
Here are 8 abusive loan practices and what you can do to combat them.
- Excessive Fees - This is just downright illegal. If your client complains of excessive loan fees, you need to a document review to see just where those fees may have originated.
- Abusive Prepayment Penalties - Another illegal move on some types of loans are prepayment penalties. A big red flag.
- Kickbacks to Brokers (Yield Spread Premiums) - The law is very clear about this one. No kickbacks!
- Loan Flipping - Some states have some pretty hefty fines for loan flipping.
- Unnecessary Products - While this is a bit of a gray area, there are some definite red flags if a mortgage company offers products and services that aren’t necessary or wanted.
- Mandatory Arbitration - A borrower has a right to a fair hearing. If a mortgage company mandates arbitration through a company that is friendly to their interests, that’s abusive.
- Steering & Targeting - The practice of steering clients to a more expensive loan when they can qualify for a more reasonable one. Very abusive.
- Breach of Contract - This is one an obvious legal red flag. If it’s in writing and they don’t do it then they’ve violated the law.
There are obvious lender violations and then there are some that are more subtle. Still, a violation is a violation. If you want to fight and win against predatory lending, no matter what the violation, then you need to start with a forensic loan audit. Uncover the evidence first.
Litigating a loan settlement claim can get sticky without the right documentation. When you enter into court on behalf of your client you want to have all of the documentation necessary to present your case and get a win for the client. That means uncovering any lender violations that give your client the right to rescind their loan. How do you find that information out? Should you wait for the discovery phase of your court case?
Waiting can be detrimental to your client and to your reputation as a tough lawyer. You need to know the facts before you enter discovery and the best way to get down to the core of your client’s case is to order a forensic loan audit.
The forensic loan audit can tell you several things about your client’s mortgage, including:
- Is it an FHA or non-FHA loan?
- Are there TILA violations that can give your client rescission rights?
- Is it subject to HOEPA law?
- Does the loan provide your client with a net tangible benefit?
- Did your client’s mortgage company make any substantial material claims or misrepresentations that caused your client to enter into a loan that is detrimental to their welfare?
And it can do a lot more. This is just the tip of the iceberg. Bottom line, if you are litigating the case and expect to win, you’ve got to know who your client is doing business with and how they are doing business. The forensic loan audit can tell you that.
Learn more about lender litigation strategy now.