We are often asked what we look for in a forensic loan audit.

Typical items we look for when conducting a forensic loan audit:

(1)    Did each borrower or person with ownership interest in the property get two copies of the proper Notice of Right to cancel with the Rescission dates filled in?  (Federal Truth in Lending requirement – TILA).

(2)     Were the material TILA disclosures made, and were they accurate if made (APR, Finance Charge, Amount Financed, Total of Payments, Payment Schedule).  If these disclosures were not or defective in nature, an extended three year right of rescission exists in non-exempt transactions.

(3)    Were the good faith estimate and preliminary truth in lending statements given to the borrower within 3 days of giving the loan application? 

(4)    Were advance fees improperly collected?

(5)    Was the broker/loan officer/lender properly licensed at all stages of the loan origination process?

(6)     Was the ARM / Option ARM / Negative Amortization Loan accurately disclosed in the note and adjustable rate rider and any loan program disclosure?  Were the disclosures consistent?

(7)     After the broker/lender ran the credit, were the credit scores disclosed and factors affecting risk properly disclosed?

(8)     Did the Client receive a copy of the appraisal?

(9)     Can the lender or investor produce the promissory note and prove it has the legal right to collect the debt?  This is not so much a forensic audit issue, but rather an issue that can be raised at a later date.  Not finding a copy of the promissory note in the loan file also triggers the need to have them produce the note so we can verify the actual terms of the note.

(10)    Is the note clear and comprehensible (or do we have grounds to argue that a contract was never formed – that there could be no meeting of the minds)?

(11)    Unfair Competition – If we find a violation of RESPA, Truth in Lending or HOEPA, or other law, do we have grounds to assert that the lender has engaged in unfair, deceptive and/or fraudulent business acts and practices and seek the imposition of a constructive trust forcing the lender to disgorge any ill-gotten gains or to seek an injunction?  Countrywide was sued under Business and Professions Code Section 17200 and 17500 for false advertising and deceptive business practices.

(12)     Were the loan documents properly signed and notarized?

(13)     Option Arms / Negam Loans: These loans are predatory in nature and potentially unconscionable.  The terms of the note and adjustable rate rider and loan program disclosures may conflict making it virtually impossible to properly understand the terms of the loan and to disclose this properly per truth in lending requirements.

(14)     Is the loan substantively unconscionable and thus unenforceable?

(15)     Was there fraud, deceit, deception, coercion or undue influence used against the elderly (elder abuse issues)?

(16)     If the lender targeted minority groups, where the contracts negotiated in the language of the borrower (lender would be required to sign documents in a certain protected language of the borrower or a right to rescind is created?

(17)     Was there predatory underwriting on stated income loans (i.e. underwriter did not verify borrowers stated income via salary.com, 4506-T statements, or in another manner as required by their internal policies – turning a blind eye and not following their own underwriting policies to get a loan done)?

(18)     Were there excessive fees that Violate HOEPA?  Or a Lack of HOEPA disclosures? Or excessive YSP fees that are predatory in nature that feathered the nest of the  broker at the expense of the borrower?

(19)     Was the borrower asked to sign conflicting disclosures or documents such as two different ARM disclosures or two different truth in lending statements that reflect two different APR’s or Interest rates (evidencing potential bait and switch or deceptive loan practices)?

(20)    Were FICO scores and credit risk factors properly disclosed?

         As you can see, we are closely scrutinizing the work of the lenders and holding their feet to the fire.  They have rules they need to comply with, and they should be held accountable where their legal violations are uncovered.

       Note: The strength these violations depends upon whether or not your originating lender still holds the loan or whether a third party investor purchased the loan on the secondary market.  In addition, there are no guarantees, promises or representations made that a loan audit will reveal any of these loan compliance or legal errors.  Every file is different.  We are never required to follow-up our audits or loan modification services with actual litigation.  Attorney has the sole discretion whether or not to accept any litigation cases.  This is an advertisement and communication pursuant to state bar rules.   We only seek to represent Clients in Arizona and California where the attorney is licensed to practice law.

Also check out our new loan modification radio show at www.LoanModRadio.com  

(1) What is the foreclosure process / timeline in California?

ANSWER: Many people hear the word foreclosure and think of it as an isolated event.  It is actually a process that spans 4 or 5 months or so, sometimes longer.  We have had Clients who have not made payments for as long as 20+ months or so.

The process is defined by California Civil Code Section 2924 and generally requires the following to be strictly adhered to:

(A) Breach of loan contract (default).  Typically we have seen a lender will wait three or four months or more before formally declaring a default.

(B) Notice of Default (lender is formally claiming a default of the loan contract has occurred).  Lender files a “NOD” with the County Recorder’s Office and serves the homeowner with the notice and posts a notice on the property.  Filing this notice normally “starts” the foreclosure process in California.  Per 2924, the lender may not give notice of sale for at least 90 days once the NOD is filed.

Loan Mod Tip: The NOD is required to state certain things (such as a declaration that the lender has tried to contact the borrower, assess their financial situation and discuss loan modification options ) if they fail to make these attempts to modify your loan, and/or to make this declaration in the NOD, this can provide potential grounds to enjoin the foreclosure proceeding (SB 1137 Requirement).  Only a law firm can insist your legal rights be honored in this regard.

(C) Notice of Trustee Sale (aka “Notice of Sale”).  Following the 90 day period after the NOD is filed, the Lender may file and record a NOS with the County Recorder.  This notice must specify the time and date of the sale which must be at least 20 days after the notice of sale is filed (typically the lender will schedule the sale date on the 21st day following filing of the NOD).

(D) Reinstatement Rights: Normally, the Borrower may reinstate the loan up to 5 days before the foreclosure sale date

So, as you can see, the process can take 110 days or more.  You can seek to negotiate a loan modification during this process.

Loan Mod Tip: When Clients hire our law firm, we can typically get the lender to stop or postpone the sale date by us submitting financial documents and a letter of representation on your behalf.  While this does not happen all the time, normally the lender is willing to work with the homeowner, especially where the property is really upside-down and the lender faces a huge loss by foreclosing.

LOAN MOD DEFINITIONS:  THE LANGUAGE OF LOAN MODS: We should also get the terms on the table for those who have not taken real property law and are wondering what all the words are that they are seeing on the Notice of Default.

- Deed of Trust is a Three Part System: (Definitions)

- Trustor: This is the borrower

- Beneficiary: One to whom the obligation is owed (ex. the bank or investor)

- Trustee: Holds the Deed and is the one who is instructed to foreclose by the Beneficiary if you do not pay off the loan as agreed.  If you pay off the loan, it is the trustee that re-conveys the deed to you.

Loan Mod Tip: When you get that foreclosure notice it is time to take action (it’s never to late to start talking with the lenders about a loan modification)!!  Calendar the dates and times of the scheduled notice of sale and notice of default.  You can also contact the lender and see if they have any modification offers for you.  Note:  Don’t take anything as true unless the lender puts it in writing.  The major lenders have so many departments and so many employees, it is not uncommon to hear different things depending upon who you talk to.  We have had loan modification companies tell us they haven’t received the loan modification package, only to find that we have obtained a loan modification the very same week.

(2) Are California homeowners guaranteed a loan modification?

(a) No. It would be nice to think Congress would have provisioned a loan modification for every California homeowner, unfortunately they did not.  The Banks obviously have no interest in helping all homeowners either.   While the government is busy bailing out AIG, the Banks, and Big Auto companies, the homeowner on Main Street gets only a little bit of consideration.

We are dealing with tough economic times right now.  Everyone is suffering and our financial institutions are getting the financial care they need, while the homeowner has to fight for everything they get.

(b) The other problem is that we need to keep in mind that the loan you took out was a legal contract between yourself and your lender where in you pledged your house as collateral (in the deed of trust) in the even at some point you were unable to pay back your loan (as referenced in the promissory note).  So at the end of the day, we are fighting for a loan modification with tough-nosed bankers who put their financial interests in front of yours.  As we tell our Clients, there is no constitutional right to a loan modification.

In fact, if anyone promises you or guarantees you a loan modification you should run for the hills.  What we are finding with these loan modification scam companies is that they promise you the world and deliver very little.  Don’t be the next victim of false promises.

(3) What should a California Homeowner do when they get a foreclosure notice?

(1) Keep in mind you are not alone.  Receiving a NOD can be an embarrassing and frustrating event.  Thoughts of loading the moving truck and moving out of your house in the middle of the night with your family and kids, and saying good-bye to the American Dream and moving into uncertainty can be a daunting task for anyone.  That being what it is, DO NOT IGNORE YOUR NOD.

No matter how dire the situation appears, you have to face it straight on.  Ads my mother used to say, “tough times never last….but tough people do.  You may be able to obtain a loan modification, or short sale of the property or seek Chapter 13 bankruptcy protection.

(2) Contact your lender see if they are willing to work with you.  Ask them if they are implementing loan modifications.  Most lenders have a loan modification (or “loss mitigation”) department set up to handle defaulting borrowers.  If you have the time to devote to the process of obtaining a loan modification, you may want to handle the case yourself.

1. Find a reputable company to represent you: If you want to be represented by a loan modification company such as a law firm like ours, give them a call and ask them about their services and fees, etc.

Loan Mod Tip:  Be careful with choosing a loan modification company.  There are many loan modification and foreclosure rescue scam companies out there.

1. Brokers without advance fee agreements / trust accounts
2. “Attorney backed” or “Attorney Based” loan modification companies  (false advertising)
3. Law Firms that used to practice personal injury, family law, divorce law, etc. and moved into loan modifications purely for a profit motive, and who may or may not have solid real estate experience.
4. As we discussed, I am an Attorney Licensed in Arizona and California and have a Broker’s license in both states.  I have sold mortgage products and understand the loan origination process.
5. OTHER TIPS:  Beware of offers of principal reduction.  This is what everyone wants right now and the scammers will tell you what you want to hear.  They will also tell you about having lender connections, and 2% interest rates, and having years of experience.  BEWARE!!!  Also beware of the 100% Money back Guarantee.  While attractive, we find once a scammer has the money in the bank, good luck getting it back.  Do your homework.  Contact the state bar, goolge the company using the word “scam” at the end, check with the State Bar (is the attorney licensed?), check with the DRE advance fee agreement list.

FREE OFFER: Call our office at (877) 276-5084 and we will help you research the company you are considering using.  We will not disparage other companies but we will point out some obvious things that you may not be aware of.

Baseball:  Ted Williams was one of the greatest hitters of all time.  In his instructional book “The Science of Hitting” Ted (Mr. Baseball) said that the most important thing in hitting is to get a good pitch to hit.  Without getting a good pitch, even the best swing is of little help.  The same is true in seeking a loan modification company – FIND A GOOD COMPANY THAT WILL WORK HARD FOR YOU!

(4) Discuss your options: (bankruptcy / short-sale / deed-in-lieu of foreclosure / loan modifications etc.).  Knowledge is power – and by hiring a law firm that is prepared to discuss the full realm of options available to you.

1. Submit Honest and Accurate Information on a Timely Basis and work with your Representative.

(6) Save as much money as you can: No matter what eventually happens you will want to save up as much money as possible.  If you make the voluntary decision not to make your mortgage payments (we do not advise homeowners not to make their mortgage payments), do not go on a spending spree.  Save your money.  MONEY MATTERS:  (a) If you decide to sell or walk away from your home, you will have to pay moving expenses, security deposits, etc.  (b) If the lender is willing to modify, they may request the borrower bring money to the table to workout a deal.  If you ultimately decide a chapter 13 bankruptcy is the best bet, you will need advance fees to pay a bankruptcy attorney as well.

Rather than taking the governments approach to problems (spend money) your best bet will be to preserve your capital to the extent possible.(4) Should a California Homeowner Stop Making Mortgage Payments when they are seeking a loan modification?

This is a question we cannot answer for you, and will not advise you on.  While the conventional wisdom on the street is that you have to be late in order to obtain a loan modification, this is not always true.  Under President Obama’s Making Home Affordable Program (HAMP), a lender may still provide a loan modification and seek financial incentives where a borrower can demonstrate that they are in “imminent threat” of being late on the mortgage.  This language suggests that a homeowner does not actually have be late on the loan to obtain a modification.

Loan Mod Tip: In fact, our office has obtained loan modifications where borrowers had not yet missed a mortgage payment.  Keep this in mind as you seek to preserve your credit.  While it will not hurt our case if you are late on your mortgage, whether or not to make your scheduled mortgage payment is a personal decision and should be based upon your overall financial situation and ability to pay.

(5) What are some of the options to a homeowner facing foreclosure?

1.    Seek a loan modification

1. Pursue a short sale (list house for sale with short-sales realtor).  Submit purchase contract, estimated HUD-1 to both first and second mortgage.  Second must also agree to the sale.  The first may give some of the sales proceeds to the second to compensate the second.  However, the second mortgage retains the right to charge-off their debt / seek a deficiency judgment.

Bank of America has a new program (in short sale agreement) asking sellers in a short sale to agree to repay the difference that the bank is compromising.  I have seen Aurora try this also.  The lenders claim this is simply to protect their investors and insurers.

Short Sale or BK? In chapter 7 bankruptcy, maybe the debtor will lose the house, but liability to both the first and the second mortgage lenders will be wiped out.   Even in chapter 13, the debtor can often get rid of second mortgage by “lien stripping” and keep the house by making payments over a period of 3 to 5 years.  Contact a Bankruptcy specialist for more information.

1. Walk away and allow foreclosure to run its course

Have to consider deficiency judgments:  First may not come after you following a trustees sale, but a junior lien-holder (2nd mortgage) may charge off your debt and seek to collect.  Deficiency judgments and other debts may be able to be written off in BK if the lender persists in pursuing a judgment following a sale.

1. File for bankruptcy
2. Hand over the deed in lieu of foreclosure

(6)  What is a deed in lieu of foreclosure?

This is where a homeowner basically wants to walk from the property and seeks to quitclaim the deed back to the lender.  The lender must be willing to accept the deed and if they do this wipes out the loan via merger.

The lender may not want to accept the deed because basically it will still have to deal with any second mortgage, tax liens, judgment liens, etc. on the property that remain after the DIL.  A foreclosure wipes out these other liens.  Many lenders would therefore prefer to foreclose and get clean and marketable title.

Note: The DIL only transfers the property to the lender.  It does not wipe out the debt unless the lender agrees to do so.  The lender may retain the ability to come after you for a deficiency judgment if the ultimate sale of the property does not net the amount owed (which normally it doesn’t these days).

Loan Mod Tip: I have been told that Deed in lieu can hurt your credit just as much as a foreclosure or bankruptcy.  Apparently this can cost you about 200 points on your credit if your lender accepts.  Also, many lenders will issue a 1099-C for any debt forgiven  resulting from a DIL.  Pursuing a short-sale may be provide a better solution and should be looked at.

(7)  Should consumers be paying advance fees when they are seeking a loan modification? (Who ya gonna call?)

There are many organizations and regulators who take the position that homeowners do not need to pay an advance fee in order to obtain a loan modification.  If you are talking about just submitting your financials (tax returns, pay stubs, bank statement etc.) and see what, if anything, the lenders are willing to provide you as far as a loan modification is concerned, I would say yes, you can do that yourself and no need to pay anyone an advance fee, UNLESS OF COURSE YOU JUST DON’T HAVE THE TIME TO CONTACT THE LENDERS AND YOU WANT TO HIRE SOMEONE TO DO THIS WHILE YOU AVOID THE HASSLES AND POTENTIAL EMBARASSMENT AND/OR ASSUMING YOU WANT TO SPEND TIME WITH YOUR KIDS AND FAMILY AND FIRNDS RATHER THAN DEALING WITH YOUR FINANCIAL CRISES.

Now, a fair number of our Clients tried to get their own loan modification and either were denied, or ultimately gave up for the inability to contact their lenders.  This is what they tell us, this is not fabricated by us.

Still others see some of the benefits to hiring a lawyer of which I will lay out THE TOP REASONS TO HIRE A LAWYER, ATTORNEY OR LAW-FIRM TO ASSIST YOU IN SEEKING A LOAN MODIFICATION.

1. Some people really truly do not want to deal with their financial crises and would rather hire someone to do this for them.  Some people figure hiring a lawyer (since the lenders have lawyers on their side) is the best option for them.  They voluntary enter into agreements with attorneys who agree to assist them in this endeavor.  If the attorney does not lie, mislead, deceive the consumer, then there is no harm.
2. Some people don’t know anything about dealing with their mortgages, discussing interest rates, discussing workout programs, etc.  Just as some people could do their own taxes, or write their own holographic wills, or file their own lawsuits people should be free to hire someone they trust, and someone who is licensed to do this for them.
3. Some loan modification agreements (ex. Wachovia) specifically state “borrower acknowledges they have had the opportunity to have a lawyer review this agreement….”  This suggests that a borrower should consult with an attorney before signing the loan modification agreements provided by a lender or servicer.  I don’t know how many attorneys would get involved in the limited task of reviewing loan modification agreements, especially where there is a larger role to play.
4. Only an Attorney can assert and protect your legal rights and ensure the lenders and loan servicers follow the very limited rules of their business.  For example, only an attorney can assure that the servicer complies with:

(a) Foreclosure rules that require beneficiaries and/or their agents to contact you to review your financial condition and discuss loan workout solutions before filing a NOD.  Is a broker or non-profit agency able to protect your rights in this regard?  An attorney can file for an injunction against foreclosure where the lender fails to honor this new legal requirement and insist that this right be honored.  What good is this law if no one can enforce it?  See California Civil Code Section 2923.5

(b) Submitting a qualified written request (QWR) under RESPA that seeks to ensure  the lender is properly servicing your loan and applying payments.  Only an attorney can seek to force the lenders to comply with these requests and to potentially file a lawsuit for a RESPA violation and/or seek an injunction against foreclosure (on grounds of wrongful foreclosure) where the servicer is found to be cheating or otherwise improperly servicing the loan.  Only an attorney can fight to demand a full and fair accounting in this regard.  Brokers and non-profits are not able to assert these demands and insist these rights be honored.

(c) Demanding the loan servicer identify the holder of the loan obligation (a right set forth under Federal Truth in Lending law – USC ).  What good is this right if there is no one there to enforce it, or use the law?  Is this just a law that is supposed to     sit on the books and collect dust?  Only a lawyer can make this legal demand and seek to hold the loan servicer accountable where it fails to comply.  By identifying the holder of the loan obligation, two or three things become possible: (1) if the loan servicer refuses to modify the loan, a final demand can be sent to the holder of the loan, and (2) if there are proper grounds to file a lawsuit to rescind a loan (which is applicable to loan assignees) then the holder of the loan should be forced to show up in Court and explain why the right of rescission was not honored (assuming a client sends in a rescission notice).  If there is no way to identify the holder of the loan, then there is no way to ensure TILA rights (you know, that pesky consumer law) will be protected.  Finally, (3) if there are grounds to bring the holder of the loan into court, shouldn’t it be proper to ask the judge to have the holder of the loan show that it is entitled to foreclose on you?  To show that it holds the promissory note, proper assignments, and that they are entitled to enforce the loan?  Brokers and non-profit organizations which do not practice law, and which are not permitted to do so, simply cannot protect these important rights, that may even play a role in seeking a loan modification

(8)   What is this whole “produce the note” strategy we are hearing about?

This is a foreclosure defense strategy that basically says if a foreclosing beneficiary, or its agent, who is attempting to foreclose on your property, cannot produce the promissory note and any assignment of the note, then it has no legal right to foreclose on your property.

The strategy has mostly been successful in states that require judicial foreclosure (as opposed to states like California and Arizona which permit private trustee sales outside of court).

In those states where judicial foreclosure is mandated, the lender is already in Court, and it makes sense for a defendant (the homeowner who answers the complaint) to ask the the judge make the Plaintiff (lender) actually prove they have the legal right to foreclose on the loan as owner.

Now, the California foreclosure statute (California Civil Code Section 2924 et seq.) do not require that the note be produced as part of a private judicial foreclosure sale.  However, that is not to say that there may not be a way to work this strategy into a foreclosure defense, or that there might not be a judge willing to require that the foreclosing entity prove it has the legal right to do so.  The key however is probably having a legal right to go to Court on other grounds, and then raising the produce the note issue as a strategy.

In at least one California case a Bankruptcy judge required that the lender produce the note.  So there is legal precedent in California for this proposition.  In addition, more cases may be coming up on appeal.

So where I see this is playing a role in foreclosure defense is where you have a truth in lending three year right to rescind (for TILA violations) which is applicable against the loan assignee.  If you send in a rescission letter and the lender refuses to honor the request, the borrower has a right to file a lawsuit seeking an injunction and TILA damages from the lender.  If that is the case, why not also seek an injunction against foreclosure and demand that the foreclosing lender prove its right to foreclose at the same time.

Again, loan brokers and non-profit entities are not able to detect, assert or enforce your rights in this area.

When it comes to saving your home from foreclosure, you pull out all of the stops.  You never know who is going to be waring the robe, or what the current state of the law will be once you get before that person.  You have to literally turn over every rock.

(9) What is the Bankruptcy “cramdown” bill?

This is a bill that many homeowners were hoping would pass.  While BK judges are already permitted to “lien strip” second mortgages that are not secured by any equity in a homeowners property (i.e. they get rid of your second mortgage), the cramdown law would have given the Bankruptcy judges the power to strip principal off the first mortgage as well with very little the lenders could have done about it.  This would have been great because it probably would have compelled more lenders to seek meaningful loan modifications, rather than just modifications on their terms.  The law failed to pass, but there is talk about a revised bill resurfacing.

(10) What is “cash for keys”?

After a lender forecloses on a property, and the homeowner stays in possession of the property, the homeowner essentially becomes a tenant.  The new owner of the property who purchased the property at a foreclosure sale (usually the bank if they were the highest bidder) will want the owner out of the property, but also wants the property not to be ripped apart as often happens in foreclosed properties.  To remedy the situation, the lender or owner may offer to give the tenant “cash for keys.” In other words, if the tenant leaves the property within 2-4 weeks, the tenant will receive a cash incentive to hand over the keys and a well maintained property.  Often the cash can amount to one or two months worth of rent.

(11) What are the effects on California homeowners when foreclosures proceed at such a high clip?

Communities all over the country continue to be devastated by foreclosure. Housing prices are decreasing (bad for owners locked into their properties, but good for first time homebuyers).

The Obama home affordability program was designed to help make communities stable, but plenty of lenders are not giving homeowners mortgage modifications.  Instead, they are giving homeowners the finger – the middle one to be exact.  Can we expect better solutions on the horizon other than just the banks and financial institutions getting bailed out?  As Senator Durbin stated: “The Banks own the Senate.”  Don’t expect much change here.

(12) What about stated income loans?

Also called liars loans.  Allowed anyone that could fog a miror to get a loan.  The brokers and lenders packed the loan applications, and did whatever they had to do to get the loan to pass though the underwriting department.  4506-T IRS tax return forms were not completed and borrower returns were not checked for accuracy. Even lenders did not verify salary.com figures to make sure stated incomes were at least in the realm of reasonableness.

Now, lying borrowers cannot expect a lot of sympathy.  But if the Broker unilaterally placed income figures on the 1003 loan applications, this could raise a case of fraud against the original broker and lender.  If the loan is held in a portfolio loan, this could provide some legal leverage against a lender especially where the borrower has credibility that they would not have trumped up the income level, and where the tax returns will verify a different picture than the 1003 reflects.

(13)  What is this SB 94 Bill?

This is the California proposed bill that seeks to limit attorneys, brokers, and loan modification companies from accepting advance fees for performing loan modifications.  The goal is to protect homeowners from scams.  Our office is against this law for the following reasons:

1. Borrowers and homeowners should be free to hire any properly licensed professional they want to perform services they themselves do not want to perform.
2. The Lenders have paid lawyers on staff working these modifications.  Homeowners should be able to be on a level playing field in seeking a loan modification.
3. Out of state brokers and lawyers will undoubtedly continue to seek to assist California homeowners, which harms the local California economy which is badly in need of local revenues.
4. The goal should be to outlaw “attorney backed” or “attorney based companies” that do little more than falsely advertise legal services that normally aren’t involved.
5. Lawyers will not likely work if advance fees cannot be collected (would BK attorneys work if they could not collect an advance fee)?  This prevents California homeowners from being able to hire lawyers to adequately represent them.
6. Lawyers are the only ones who can protect and assert consumer rights and file lawsuits if necessary to preserve these rights.  Attorneys should not be forced out of this process.
   
   (14) How Can you Leverage a Loan Modification where the Investor Claims they are  a “Holder in Due Course?

Trying to Leverage Loan Modifications against the Assignee Holder in Due Course.

One of the Key things we try to figure out as loan modification attorneys is who holds your loan?  Who is entitled to enforce the Note?

Who will be initiating foreclosure proceedings?  Do they have all of the proper assignments and promissory note?

Who can we try to leverage (ex. Sue if we have to) to obtain a loan modification?

One way we try to find answers to these questions is by making a demand on the current loan servicer (the company collecting your mortgage payment each month) to tell us who the holder of the loan obligation is, their name, address and phone number.  We make this request under Truth In lending law (   U.S.C.   ).

One of the major problems with this law is that it does not state exactly when the loan servicer is required to supply this information.  Now, some servicers are good about providing this information in a timely manner.  Some comply but only identify the holder of the loan (ex. Wells Fargo as Investor on the loan).  Other lenders just ignore their legal compliance obligations altogether in defiance of a homeowner’s rights.  Aurora Loan Servicing is one of the more pathetic companies that come to mind in this regard.

The key thing to think about is that if your originating lender is servicing the loan, a loan audit may reveal some potent violations against them and you may be able to threaten a lawsuit that seeks legal damages.

In many cases, the loan was sold off  in the secondary market, securitized, and purchased by investors who claim there is no liability against them as they are “holders in due course” of the loan, and are free from legal claims and defenses.  While this holds some degree of truth, we would still want to audit your loan file to find potential truth in lending violations that may provide an extended three year right to rescind.   Rescission rights are applicable against any and all loan assignees, including these holders in due course.

One way to find out whether or not your loan was sold off and securitized on the secondary market is to use some free online search toools.  Many fannie mae and freddie mac loans were securitized and sold off.  Use the two tools below (check your address in both databases) and you will probably get a good idea whether or not you will be dealing with the “innocent investor” defense raised by “holders in due course.”

Does Freddie Mac own your loan?

https://ww3.freddiemac.com/corporate/

Does Fannie Mae own your loan?

http://loanlookup.fanniemae.com/loanlookup/

Now, even where the loan is owned by investors and the holder in due course problem arises, there are still some claims that can be asserted against these loan assignees.  Here are a few arguments that can be looked at when trying to threaten a lawsuit against the innocent investor.

Why take foreclosure lying down?  If you are denied a loan modification, Sue these investors FOR MONEY DAMAGES AND/OR RESCISSION and make them answer for their participation in this mortgage meltdown scheme.  The investors are sophisticated people and should not be permitted to claim ignorance when they buy a pool of predatory option arm or sub-prime loans, for example.  While you have these guys in Court, why not raise your issue of PROVE YOU HAVE THE RIGHT TO FORECLOSE ON ME BY SHOWING ME THE ORIGINAL PROMISSORY NOTE AND ALL THE PROPER ASSIGNMENTS as required by the Commercial Code.

Here are some potential legal theories to take a look at against the HDC:

(1)  Conspiracy

(2)  Joint venture

(3)  Creating the Marketplace for Predatory Option Arm loans

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MORE LOAN MODIFICATION QUESTIONS

(1)  What exactly is a loan mod?

A Loan mod is an adjustment to existing terms of your mortgage note.  For example, waive late fees and penalties, forebearnace, repayment plan, interest rate reduction, principal reduction, etc.  Remember in most cases we are dealing wtih a valid and enforeceable contract here and we are trying to get the lender to adjust the original terms of the note and deed of trust.

(2)  What does it take to qualify for a loan mod?

In general we see two distinct types of loan modifications: 1. is a loan modification based upon a financial hardship (loss of job, income, divorce, etc.)  2.  The other type being a modification that has leggs and leveerage mainly due to legal violations or predatory lending violations – that we find in a forensic loan audit – such as truth in lending violations that may provide an extended three year right to resciind.   This can create some potential leverage for us in seeking a loan modifcation.

(3)  Tell me more about the financial loan modification

If a borrower is late on their mortgage payment, or in imminent threat of being late (iceberg up ahead) they may qualify for a financial loan modification

(4)  And what kind of modifications are the lendings giving out these days?

They can tend to run the gamut…….from extending loan terms out 40 years, to reducing interest rate, to reducing principal in some cases, and step-up interest rate programs are just a few of the possibilities.

I should take just a second to say something about Wachovia and World Savings Option Arm and Subprime loans……if you have one of these two types of loans…..YOU HAVE TO CALL US TODAY.  WE ARE GETTING FABULOUS RESULTS ON THESE TYPES OF LOANS, SOMETIMES AS QUICK AS 7 OR 10 DAYS AND A FAIR NUMBER OF THESE MODIFICATIONS HAVE PROVIDED PRINCIPAL REDUCTION.  NOW WE CAN NEVER GUARANTEE ANY TYPE OF RESULT, INCLUDING PRINCIPAL REDUCTION, BUT WE DO HAVE THE PROOF TO BACK UP OUR CLAIMS THAT WITH WACHOVIA AND WORLD SAVINGS LOANS THIS IS A REAL POSSBILITY.  CAL US AT (877) 276-5084 FOR MORE INFORMATION ON OUR 100% MBG FOR THESE LOANS.

(5)  What kind of documents does a homeowner need to produce in order to get a forensic loan audit?

Some of the documents include the Promissory Note, DOT, riders, 1003, final HUD, TIL, GFE, disclosure documents, credit scores, appraisal….etc.  Basically, you send us your whole file.

(6) Okay, so you can seek a hardship modification based on problems with your finances and/or you can seek to leverage a loan modification based upon legal violations?

That’s right and basically we start our modificaton case by auditing the file and seeing where our Client stands from a legal perspective.  From there we either charge forward with a legal demand which may or may not include submitting financial documentation.  If we have a strong case for rescission we may not need to focus on financials, but in many cases we submit both the findings of our loan audit and a client’s financials in one submission.

(7)  Now is this something a homeowner can do for themseves?

(steve: financials yes, legal side of loan mods probably not)

(8) What can a homeowner expect when they try to handle a loan modification on their own?

Time commitment, frustration, resending docs, hold time, etc.

(9)  And if they want to hire someone to do the loan modification as a service what does that entail?

Well you need to decide if you want to hire a real estate broker or an attorney and weigh the costs, pros and cons of each

(10) What is the difference betweeen working with a broker versus an attorney in the loan modification context?

Brokers cannot practice law and cannot give legal advice.  That means they cannot answer your basic questions about deficiency judgments, foreclosure rules, application of state and federal law in the loan modification context etc.).  Many people are surprised to find that our pricing structure, as a law firm, is in most cases the same as what brokers are charging, and yet we provide so many additional services and we beleive that we bring much more to table as far as being able to make a loan modificaiton happen.  Don’t get me wrong, there are some great real estate professionals out there, its just that when you are dealing with your home it is probably wise to consider the impact a lawyer may be able to make on your behalf).

(11) Can you give me just a few examples of the kinds of things your law firm does that a California might not get out of hiring a broker?

The main thing to consider is that we are trying to create leverage for a loan modification where none existed before.  Remember, we talked about there being an enforceable contract and deed of trust in place that the lenders and loan servicers expect a borrower to honor.  Some people will tell you the lenders do not negotiate.  Infact, Brokers normally limit their services to packaging up your financials (pay stubs, tax returns, etc.) and submitting these to the lender.  In that scenario there is really not much as far as negotiating going on.  Now, in some cases we are relegated to the same analaysis, especially where there is no legal leverage found in our loan audits.  If you have a 30f purchase loan there may not be much to discuss.  But where we can find legal leverage, we force the servicers / lenders / investors to think about our claims and even if they don’t call us up directly to negotiate, you have to assume we interjected some infomation that factors into the decision making process.  We may force modifications where the borrower didn’t otherwise fit in the box).

So
1.  We perform the forensic loan audit

2.  When we send in our demand letters we ask for a few things:

a. QWR (RESPA RIGHT) – Stops Negative Credit Reporting for 60 days.   Demand a Life of the Loan Accounting and Loan Docs  (TILA Violation Buran Story)

b. Identify the Holder of the Loan (TIL RIGHT) – Gives us another point of contact if the Servicer refuses to modify.

c.  Request to Contact Just our Firm who represents the Homeowner (FDCPA) – Violation can result in potential damages against loan servicer and its collection company (caselaw)

d.  We set forth a loan modificaton proposal (we are trying to mediate the mortgage) that always request PR and interest rate reduction.

e.  Obviosly our letter comes from a pre-litigation posture and we have the ability to back it up with a lawsuit.

f.  Where we have TIL violations that create an extended right to rescind, we can also discuss rescission strategy and submit the rescission letter (another chance to get the lender to the table to discuss modifying the loan)

So, as you can see, these are some of the things we as lawyers can do to try to jump start the loan modification process.  Where the loan servicer violates RESPA (ex. no life of loan accounting), TILA (no produce note holder) or the FDCPA (calls you at work when you are represented by an attorney) or Refuses to Honor a Rescission Request (which creates assignee liability of which even loan servicers must answer) these things can give grounds to file a lawsuit seeking to enjoin a threatned foreclosure

(12)  Wow, I see, lots of stuff there and if you are saying you are priced competitively with brokers in this business I would say that makes it a no-brainer?

This is an important decision for everyone, and since its your property on the line you might want to think about the legal services we offer and how that might be able to make the difference in saving your home)

(13) If a Client has a NOD or NOS does that make it too late to seek a mortgage modification?

Absolutely not.  In many cases the lenders are willing to work with delinquent homeowners and they are often will to stay or suspend a sale date where the owner is seeking to work out a loan modification.  But please, in these cases do not waste any time – call us today at (877-276-5084 to discuss your case).  Also, keep in mind there are statute of limitiations which are always running. You do not want to miss the window for finding and asserting potential leverage for a loan modifciation.  Call us today before your legal rights may expire.  A representative is standing by to take your call.

(14)  AND DON’T FORGET if you have a Wachovia and World Savings Option Arm and Subprime loans……if you have one of these two types of loans…..YOU HAVE TO CALL US TODAY.  100% MBG ON THESE TYPES OF LOANS.

Hear us on the radio at KLAA 830 AM on Mondays and Fridays from 12:30 to 1:00 for the Legal Side of Loan Mods – www.LoanModRadio.com

 THis is an advertisement and communication pursuant to state bar rules.  We only seek to solicit and we only serve California and Arizona Loan Modification Clients.