In California earlier this year a company calling itself Federal Loan Modification Law Center (FedMod) hit the spotlight after it was learned that they had not been successful in delivering loan modifications to consumers who were paying them thousands of dollars for their services. FedMod is not the only company to succumb to this temptation.
You can call this practice the flip side to predatory lending. It’s predatory loan salvation - only no one’s loans are being saved. It amounts to financial rape.
FedMod had been a mortgage broker helping people get in over their heads in loans they couldn’t afford. Then, when the loan modification trend started, they started billing themselves as loan modification experts. Here’s what the Modesto Bee reported in July this year:
Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit-making loan-modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers, more than 650 complaints filed with the Better Business Bureau and documents filed by the Federal Trade Commission in a lawsuit against the company.
According to the Bee, FedMod failed to deliver one successful loan modification. That’s unacceptable.
In our view, if you want to succeed in getting your clients the loan modifications they deserve, you have to start with solid information on their loans - the good, the bad, and the ugly. A forensic loan audit is designed to uncover lender violations that could lead to a successful loan modification. It’s about time we rid ourselves of predatory lenders and their friends and help people with real services designed to keep them in their homes. A trustworthy company will offer a full money-back guarantee.
A forensic loan audit is an essential tool for a loan modification attorney. But not all of them are created equal. You can’t make a decision based on price alone. There are some essential elements to an effective loan audit that you should know before you purchase one. Here’s a short list of things to look for in your next loan audit:
- Your loan auditor should not promise to uncover lender violations; it’s not a guarantee that can be kept.
- A good loan audit is comprehensive and involves a review of every document in your client’s mortgage contract.
- A loan audit should be forensic; that is, scientifically conducted.
- Should be performed by human eyes, not a computer.
- Mortgage documents should be reviewed and compared to all relevant and applicable mortgage case law.
- Your loan audit should be in writing with an analysis indicating problem areas that your client should know about.
In the end, your loan audit should give you a clear indication on how best to proceed with negotiations for better mortgage terms for your client. If it doesn’t do that then you’ve paid too much for the loan audit at any price.
Loan modification attorneys are special people. You help people keep their homes and get them at affordable mortgage rates so that they live within their means. In the worst cases you are up against some tough predatory lenders. And if you have the right tools at your disposal you’ll beat them. Here are some loan modification terms you should know in order to win in court and at the negotiating table:
- Loan Modification - Any change to an existing loan, usually that is favorable toward the borrower.
- Loan Settlement Statement - A document given to a borrower at closing that shows all disbursements being paid to all parties involved in the transaction.
- TILA - Truth In Lending Act. Passed in 1968.
- Regulation Z - A part of TILA. Most often cited for its right to rescission for the borrower.
- HOEPA - Home Ownership And Equity Protection Act. Affords protections to consumers of high interest and high fee loans.
- RESPA - Real Esate Settlement Procedures Act. Protects consumers of loans on HUD homes.
- ARM - Adjustable Rate Mortgage.
- Loan Auditor - An individual who does not represent either party to a loan transaction, but is capable of reviewing loan documents and finding lender violations
- Lender Violation - Any law that a lender has broken intentionally or unintentionally while servicing a loan.
- Mortgage Document Review - An independent review of a homeowner’s mortgage documents and analysis regarding whether any lender violations exist.
- Forensic Loan Audit - A thorough, scientific investigation of a loan to determine whether a lender has violated any federal, state, or local laws in the servicing of the loan.
- Foreclosure Defense - A strategy used to help stop the foreclosure process before the homeowner loses her home.
These are just a few of the terms a loan modification attorney should be familiar with in order to help homeowners keep their homes and save their mortgages. Hope it helps you succeed.
If you are an attorney performing loan modifications then you’ve probably heard this question a few times.
How do you get a fair loan settlement? What do you have to do?
You should know (and you probably do) that there’s not just one thing a homeowner can do to get a fair loan settlement. There are a lot of things he can do and many ways to approach a situation. Every situation, however, is different and calls for a different strategy. As an attorney entering into the loan settlement negotiation role on behalf of homeowners, you’ve got to have more than one weapon at your disposal.
But you want to be sure that one of your weapons is a forensic loan audit. There is probably no tool that a good loan modification attorney can use that will get better results more often. It’s like using a dump truck to poor cement. What else would you use?
Seriously, a loan audit should be your door to the best evidence to use in your client’s favor. A loan document review and audit will uncover which lender violations are the most serious and which ones are the best ones to target for renegotiation. By know that information you can enter loan settlement negotiations from a position of strength.
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!
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.
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?
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.