How Loan Audits Help
A forensic loan audit is a great tool for identifying mortgage fraud. A loan audit is a review of the homeowner’s home loan documents that checks for violations of any state or federal laws as they pertain to mortgages specifically and consumer loans in general. Conducting a loan audit can help a homeowner recover damages, in some cases a court can force a lender to cancel a loan, and in yet other cases can help a homeowner gain leverage over a lender to persuade a loan modification or other workout agreement.
California and federal laws have very specific requirements for which loan disclosure documents must be given to a borrower, the loan details that those documents must contain and the time frame for when those documents and notices need to be provided. If the bank or lender failed to comply with any of these requirements fines can be levied and in some cases a court could force the home loan to be rescinded.
The documents that are typically reviewed for errors and non-compliance are the Uniform Residential Loan Application (Form 1003), Good Faith Estimate, the HUD-1 Settlement Statement, the Truth in Lending, the Note, and the Notice of Right to Cancel. When used as required, these documents help assure that lenders are adhering to mortgage and consumer lending laws such as the Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA), Home Ownership and Equity Protection Act (HOEPA), Equal Credit Opportunity Act (ECOA), Home Mortgage Disclosure Act (HMDA), Regulation Z (Reg Z), and the Mortgage Disclosure Improvement Act (MDIA).
Covering in detail these statutes and regulations and the remedies that they provide is cumbersome and probably beyond the level understanding for any non-lawyer. Explained very simply, despite the potential that lies in conducting a loan audit, most homeowners would only see awards for violations in the range of several thousand dollars, if anything. The minority might be able to take advantage of the right to rescind a loan for violations of HOEPA or the Notice of Right to Cancel. A homeowner may be a part of this lucky minority if they have refinanced their primary residence within the last three years. A homeowner outside of this narrow scope will be better served in saving their money unless there are other circumstances where a loan audit would help them mount a case against a lender in court.
