Forensic Loan Audit

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.

1. 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.
   
2. Abusive Prepayment Penalties - Another illegal move on some types of loans are prepayment penalties. A big red flag.
3. Kickbacks to Brokers (Yield Spread Premiums) - The law is very clear about this one. No kickbacks!
4. Loan Flipping - Some states have some pretty hefty fines for loan flipping.
5. 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.
6. 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.
7. Steering & Targeting - The practice of steering clients to a more expensive loan when they can qualify for a more reasonable one. Very abusive.
8. 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.