It depends largely on who is doing the audit. Numerous studies and reports confirm that over 80% of mortgages have legal violations associated to the origination of the loan. Our perceive in reviewing hundreds of files confirms this. One of the biggest problems, however, is that unscrupulous Mortgage Audit fellowships furnish "audits" that won't help the homeowner. These fellowships often use a generic software agenda that just looks at Truth In Lending Act (Tila) violations and nothing more. Most Tila violations have a 3 year Statute of Limitations. So, if the mortgage is more than 3 years old, the audit won't help even if violations are exposed. Note: If the mortgage is less than 3 years old, Tila violations can furnish principal remedies which may include rescission (cancellation) of the loan.
We have found that the most fine audit requires a faultless hand-operated recite of All mortgage documents starting with the introductory application through closing. Few fellowships absolutely accomplish this type of in-depth forensic audit properly. One of the most base violations we find is fraud. The fraud is often in the form of inflated income, assets, or appraised value. We also find that the homeowner was unaware of the fraud because it was the loan officer who falsified the data in order to get the loan closed and receive his/her commission. Sure types of fraud have no Statute of Limitations and are therefore enforceable even if the mortgage is more than 3 years old. This fraud often requires "assistance" from the loan processor, appraiser, and/or underwriter whose duties include verifications of data contained in the application and supporting documents.
For example, we recently audited a file for a client that earned just over 00 per month. They were applying for a 5,000 mortgage for the buy of a home. Their debt-to-income (Dti) ratio was over 60% so the loan should have been denied. The borrower had recently graduated from college and had less than a year on his new job. He also had numerous learner loans which were deferred while he was in school, but the payments would begin in just a few months. Rather than deny the loan (or instruct the borrower to find a less expensive property), the loan officer illegally inflated the borrower's earnings to 00 per month. We know this because we reviewed copies of the introductory loan application which showed the 00 income. This was confirmed by copies of paystubs, W-2 forms, and Federal Tax Returns. The closing box told a separate story. A revised "Residential Loan Application" was ready by the lender which increased the borrowers' earnings to 00 per month. There is only one place on the "Application" that discloses the borrower's income. It is on Page 2 which does not wish a signature from the borrower. The borrower was shocked to learn that his earnings was stated as 00. He never saw this number until we pointed it out. Now that his learner loan payments are due, he is unable to afford the mortgage cost and is facing foreclosure as a result. A loan modification is now being processed to lower his payments.
In another case, a borrower applied for a 30 year fixed conventional mortgage in 2006. He was well fine and there should have been no question getting this loan as requested. The loan officer, however, talked the borrower into accepting a loan with a Balloon cost which was due in 5 years. The rate was slightly best (.375%) which meant that the monthly mortgage cost was about less per month. The borrower liked the lower payment, but was concerned about the Balloon Payment. The loan officer improperly persuaded the homeowner to move send with the Balloon Note in spite of the borrowers concerns. The loan officer assured him that he would be able to refinance the loan before the Balloon Note was due and that he should take benefit of the monthly savings. Why was the loan officer so insistent that he accept the Balloon Note? There are 2 reasons; first, the Balloon Note likely produced a larger commission for himself. Secondly, he was positioning himself to refinance the loan in order to earn another commission when the Balloon Note was due (a custom known as "Churning" or "Equity Stripping"). The loan officer was negligent because he had no way of knowing either the Borrower would qualify for the refinance as planned. Guess what...his Balloon Note came due in 2011 and he was not able to refinance because the property value had declined by about 50%. His lender refused to modify his loan and he was facing foreclosure as a result. The lender "Breached their Fiduciary Duty" by putting the Borrower in harm's way.
If you look at the numbers closely, you will see that the Borrower absolutely would not have saved any money even if the property value had not declined and he refinanced as the loan officer suggested. The monthly "savings" amounted to 80 over the 5 years before the Note matured. ( times 60 months equals 80). But, the closing costs to refinance the loan would likely have been at least that much which would negate any real savings. This homeowner did nothing wrong, but he now has damaged prestige (the Note is delinquent because he could not refinance or tender the Balloon Note of almost 0,000). More importantly, he is worried sick that he will lose his home and not be able to buy another. The good news is that his attorney is Sure that he will get his loan modified largely due to the findings of our full hand-operated forensic audit. This will likely supervene in the reamortization of the loan with an interest rate that is lower than he may have obtained through a refinance. There will be no closing costs and he expects a much lower cost as a result.
There are, of course, other types of mortgage audits for other purposes. Securitization Audits recognize either the lender has the permissible "standing" to foreclose. another type can identify Foreclosure policy Violations (such as robo-signing).
These are just a few examples of how homeowners have been victimized by predatory lenders. If you are inspecting a forensic mortgage audit, we propose that you only deal with a reputable and fine business who does a "Full hand-operated Audit".
Mortgage Audits - Do They actually Help?