1. finance
2. personal finance
3. lending
4. personal loans

Forensic
Loan Audit Mortgage
Compliance Analysis Report
Prepared For:
Name:
…………………………...….
Address:
…………………………..….
…….………………..………
…….………………..………
Purchase
Amount: $ …………………
Date: (MM/DD/YYYY)
Table of Contents
Transaction Participants………………………………………..
Transaction Details………………………………………………
Summary…………………………………………………………..
Audit Notes and Comments…………………………………….
Mortgage Loan Audit Section…………………………………...
Current Strategies………………………………………………..
Alternative Causes of Action……………………………………
Missing Documents………………………………………………
Date: (MM/DD/YYYY)
FORENSIC LOAN AUDIT
MORTGAGE COMPLIANCE
ANALYSIS REPORT
TRANSACTION PARTICIPANTS
Borrower Names:
Subject Property:
Settlement Date:
Funding Lender:
Settlement Agent/Title:
Originating Firm:
TRANSACTION DETAILS
Mortgage Position:
Transaction Type:
Sales Price/Value:
First Mortgage:
CLTV:
Loan Type:
Index:
Index at close:
Margin:
Start Rate:
Initial Payment Rate:
Fully Indexed at close:
Amortization:
First Payment Change:
First Payment Cap:
Subsequent Changes:
Interest Only Period:
Negative Amortization:
Lifetime Cap on Interest:
Lifetime Floor on Interest:
Prepayment Penalty:
Property Type:
Property Mortgage Insurance:
Yield Spread Premium:
Prepaid Finance Charge Sampling:Loan Origination Fee:
Funding Fee:
Tax Related Service Fee:
Flood Certification Fee:
MERS Transfer Fee:
Processing Fee:
Closing/Escrow Fee:
Tracking Fee:
SUMMARY:
Truth-in-Lending Act
Real Estate Settlement Procedures Act
Equal Credit Opportunity Act
Gramm, Leach, Bliley Act
Fair & Accurate Credit Transactions Act
Fair Credit Reporting Act
Underwriting Issues
(TILA)
(RESPA)
(ECOA)
(GLB)
(FACTA)
(FCRA)
Violations Found
Violations Found
Violations Found
Violations Found
Violations Found
AUDIT NOTES AND COMMENTS:
A Forensic Loan Audit of the above referenced loan was completed on MM/DD/YYYY. The Scope of the
audit was limited to a determination of accuracy and compliance of the loan documentation included in
the file submitted for audit. Any unsigned documents have been noted as such and for purposes of this
audit were treated as final and original documents.
As noted below, this file did not include various initial disclosures that are mandated under both state
and federal laws. If a broker does not deliver the initial disclosures to the borrower, it becomes
incumbent for the lender to ensure that these disclosures were delivered to the borrower. If the
borrower was not provided with these disclosures within three business days from the date of the
original loan application, the borrower will need to complete a sworn statement testifying to that effect.
Supporting Case Law:
•
Yamamoto v. Bank of New York, 329 F. 3d 1167 (9th Cir. 2003).
•
Smith v. Chapman, 614 F. 2d 968 (5th Cir. 1980).
Action Steps
This is an example of a legal approach that other attorneys and modification companies have or
currently use in the marketplace.
1.
The attorney or modification obtains a forensic loan audit to determine the strength of the
case.
a. In the case of a modification company if violations are found, a certified opinion letter
should be obtained in conjunction with the audit.
2.
The borrower's representative should then send a qualified written request to the bank
requesting the loan file. (See sample below) The bank must provide a written response
acknowledging receipt of the correspondence within 20 days. 12U.S.C. § 2605(e)(1)(A) and
(B).
3.
The borrower's representative then presents their claim of violations within the loan to the
lender.
4. The lender has 60 days from the qualified written request to actually fix any alleged violations
through a workout agreement. 12U.S.C. § (e)(2)(A), (B), and (C).
5.
If the lender does not fix the violations within 60 days, the borrower is entitled to bring a claim
for any violations found in the loan.
6.
Upon a successful claim of lending violations against the lender, the borrower is entitled to
damages based on the specific violations.
a.
Typically a borrower will always be entitled to actual damages, attorney fees, and
statutory damages in the amount of $1000 per violation. 12U.S.C. § 2605(a) Reg. X,
24C.F.R. §3500.21.
b.
In some cases borrowers will be entitled to three times the amount paid for settlement
services, attorney fees, and costs. 12U.S.C. § 2607 Reg.X, 24C.F.R. § 3500. 14(b).
Audit Findings
The following are the auditor's comments and findings by Regulatory Act, pursuant to our audit of this
loan file:
TRUTH IN LENDING ACT (TILA)
Initial Truth-in-Lending Statement
The Initial Truth-in-Lending Statement was in the file. Pursuant to TILA, lenders are required to
provide this document to the borrowers within three business days of Initial Application. Regulation Z
implements that TILA requires the APR to be accurate within a tolerance of .125%.
Right of Rescission Notice
The Right of Rescission Notice was not in the file. However, there is no proof that the Notice was
given to the borrower with in the required timeframe and that the proper rescission period was
provided to the borrower.
The Truth in Lending Act (TILA) is designed to provide consumers with accurate information about
loan transactions in order to facilitate informed use of credit. TILA requires a creditor to disclose
certain important information about the credit terms to the consumer in writing, prior to consummation of
a credit transaction.
The provision of TILA that is most relevant to loan modification and foreclosure defense is the right of
rescission. This right applies to consumer credit transaction in which a non-purchase money lien or
security interest is or will be placed on the consumer's principal dwelling. 15U.S.C.S. § 1635(a).
The rescission right is absolute for 3 days, but it is extended for up to 3 years if certain material TILA
disclosures were not provided correctly at the time of the original credit transaction or a proper notice of
the right to cancel was not given.
Inaccuracies in certain disclosures are actionable only if they exceed tolerances set by the statute.
15U.S.C.S. § 1605(f). However, when rescission of a transaction after initiation of a judicial or
non-judicial foreclosure proceeding is based on an error in disclosing the finance charge, the tolerance
is just $35.
TILA rescission can be a powerful tool, providing an extremely beneficial remedy for consumers
facing foreclosure or struggling to meet payments on a home or equity loan with onerous terms.
Your loan closing date was on xx-xx-xxxx. As noted previously, the right to rescind normally lasts 3
days after consummation of the transaction, but can be extended for up to 3 years if the creditor fails to
give the consumer all material disclosures or fails to provide proper notice of the right to rescind. For
closed-end credit, the material disclosures are defined as the annual percentage rate, the finance
charge, the amount financed the total of payments, and the payment schedule. 12C.F.R. § 226.23. In
addition, if the loan is a high rate loan covered by HOEPA, failure to make the special "advance look"
disclosures or inclusion of a prohibited term extends the rescission period.
The creditor must give each consumer 2 copies of a notice of the right to rescind. The Federal
Reserve Board's regulations specify the content of this notice. Many courts have held that errors of
omissions in the notice, or failure to provide the proper number of copies, extend the right to rescind.
Once notice of rescission is given, the lien on the consumer's home becomes void, taking away the
creditor's foreclosure remedy, and its leverage. The homeowner is entitled to a return, or a credit
against the balance of the debt, of all finance, interest, and other charges, such as closing costs and
broker fees. Semar v. Platte Valley Federal Savings & Loan Ass'n, 791 F.2d 699 (9th Cir. 1986). This can
dramatically reduce the consumer's debt if the interest rate or charges were high or substantial
payments had been made. In certain circumstances the consumer may even have the right to retain
the proceeds or goods purchased.
The creditor's failure to perform it's TIL rescission obligations may be a separate TILA violation
entitling the consumer to actual and statutory damages and attorney fees. Aquino v. Pub. Fin.
Consumer Discount Co., 606 F. Supp. 504 (E.D.Pa. 1985). If the loan if covered by the Home
Ownership and Equity Protection Act (HOEPA), the consumer is entitled to not only statutory
damages and actual damages, but also special enhanced damages in the amount of all finance
charges and fees paid by the consumer. 15U.S.C.S. § 1640(a)(4). This award can make a substantial
reduction in the balance. The consumer may also recover damages for other TILA violations even
when the transaction is canceled. The one-year statute of limitations for TILA damage claims runs
from the date of the violation in the case of violations of the creditor's rescission obligations, but it runs
from the date of consummation of the transaction for disclosure violations.
Supporting Statutes
■
12C.F.R. §226.23
■
15U.S.C.S. §1605(f)
■
15U.S.C.S. §1635(a)
■
15U.S.C.S. § 1640(a)(4)
Supporting Case Law
■
Albano v. Norwest Fin. Haw., Inc., 244 F.3d 1061 (9th Cir. 2001)
■
Aquino v. Pub. Fin. Consumer Discount Co., 606 F. Supp. 504 (ED.Pa. 985)
Semar v. Plate Valley Federal Savings & Loan Ass'n, 791 F.2d 699 (9th Cir. 1986)
Initial ARM Disclosure
The Initial ARM Disclosure was not in the file. The borrower was offered a Fixed Rate Mortgage.
Pursuant to Regulation Z which implements TILA, lenders are required to provide borrowers an ARM
Disclosure with in three business days of the Initial Application for all adjustable rate mortgages. If the
borrower was never offered an adjustable rate mortgage, an ARM Disclosure with in three business
days of the Initial Application is not required.
If the terms of the legal obligation allow the financial institution, after consummation of the transaction, to
increase the APR, the financial institution must furnish the consumer with certain information on
variable rates. Some of the more important transaction-specific variable-rate disclosure requirements
under section 226.18 are:
A.
Disclosures for variable-rate loans must cover the full term of the transaction and must be
based on the terms in effect at the time of consummation.
B.
If the variable-rate transaction includes either a seller buydown that is reflected in a
contract or a consumer buydown, the disclosed APR should be a composite rate based
on the lower rate for the buydown period and the rate that is the basis for the variable-rate
feature for the remainder of the term.
C.
If the initial rate is not determined by the index or formula used to make later interest rate
adjustments, as in a discounted APR must reflect a composite rate based on the initial
rate for as long as it is applied and, for the remainder of the term, the index or formula at
the time of consummation (that is, the fully indexed rate).
D.
If a loan contains a rate or payment cap that would prevent the initial rate or payment, at
the time of the adjustment, from changing to the fully indexed rate, the effect of that rate
or payment cap needs to be reflected in the disclosure.
E.
The index at consummation need not be used if the contract provides for a delay in
implementation of changes in an index value (for example, the contract indicates that
future rate changes are based on the index value in effect for some specified period, such
as forty-five days before the change date). Instead, the financial institution may use any
rate from the date of consummation back to the beginning of the specified period (for
example, during the previous forty-five-day period).
F.
If the initial interest rate is set according to the index or formula used for later adjustments
but is set at a value as of a date before consummation, disclosures should be based on the
initial interest rate, even though the index may have changed by the consummation date.
G.
The initial interest rate would trigger the requirement for the lender to disclose the highest
monthly payment at every Change Date, and ultimately over the life of the loan. This in
turn, also directly affects the APR ("Annual Percentage Rate") calculation and the Finance
Charges illustrated on the Truth in Lending Disclosure ("TILA").
For Example:
Index at Closing
5.4390%
Margin per Note
2.7500%
New Interest Rate
8.1890% v. 6.5000%
Using the APR WIN Calculator offered on the Federal Reserve Board's website does not
allow the use of an introductory rate feature.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
Good Faith Estimate
The Good Faith Estimate Disclosure was found in the file. The fees included in the Good Faith
Estimate do not match with the HUD-1 Settlement Statement, Truth in Lending Disclosure Statement
and Uniform Residential Loan Application. Lenders are required to provide borrowers with a Good
Faith Estimate with in three business days of Initial Application and the estimated fees included on the
GFE must be a reasonable estimate of the actual fees charged to the borrower per the HUD-1
Settlement Statement.
a.
At Closing, we noted that your interest rate was ………. % on the note between yourself and
……………………………………….. and that the loan amount was $ ……………… . Was this
disclosed to you in writing at least 3 days before closing? This is significant, as you should
have received a set of preliminary disclosures, including a Good Faith Estimate, reflecting
the interest rate and the estimated costs. Any Loan Discount Fees payable to the broker
are erroneous, as this fee should have been paid only if you were receiving an interest rate
below par. The lender was supposed to prevent predatory lending practices.
The Real Estate Settlement Practices Act of 1974 (RESPA) represents a response by Congress to
perceived abuses in the real estate settlement process and an attempt to protect consumers from
unnecessarily high settlement charges resulting from those abuses. The stated purpose of RESPA
was to bring about certain changes in the settlement process for residential real estate that would
result in;
1. more effective advance disclosure of settlement costs to home buyers and sellers;
2.
elimination of kickbacks or referral fees that had the tendency to increase unnecessarily the
costs of certain settlement services;
3.
reduction in the amounts that home buyers were required to place in escrow accounts
established to insure the payment of real estate taxes and insurance; and
4.
significant reform and modernization of local recordkeeping of land title information.
12U.S.C.S. §2601.
The Real Estate Settlement Practices Act of 1974 applies to any "federally related mortgage loan,"
that is, a loan other than temporary financing such as a construction loan that is secured by a first or
subordinate lien on residential property, including individual units of condominiums and cooperatives.
12U.S.C.S. § 2602(1)(A). It also applies to loans made in whole or in part by any lender with deposits or
accounts that are insured by a federal agency or a lender that is regulated by the federal
government. 12U.S.C.S. § 2602(1) (B)(i).
HUD-1 Settlement Statement
RESPA requires lenders to use a uniform settlement statement, as prescribed by the Secretary of
Housing and Urban Development (HUD). The settlement statement must "conspicuously and clearly
itemize all charges, imposed upon the borrower and all charges imposed upon the seller in connection
with the settlement." 12U.S.C.S. § 2603(a). This form must be completed and made available for
inspection by the borrower at or before the time of settlement. 12 U.S.C.S. § 2603(b).
Transfer of Servicing Disclosure
The Initial Transfer of Servicing Disclosure was not in the file. RESPA requires this disclosure to be
given to the borrowers with in three business days of Initial Application.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
ECOA Statement
The ECOA Statement was in the file. Regulation B which implements the Equal Credit Opportunity
Act requires lenders to provide this disclosure document to all borrowers.
Right to a Copy of the Appraisal Disclosure
The Right to a Copy of the Appraisal was not in the file. Regulation B which implements the Equal
Credit Opportunity Act requires lenders to provide this disclosure document to all borrowers.
GRAMM, LEACH, BLILEY ACT (GLB)
Privacy Policy Notice
The Privacy Policy Notice was not in the file. The GLB Act requires brokers/lenders to provide this
notice to all applicants "at the time a relationship is established with the consumer", or in this case, at
time of Initial Application.
FAIR & ACCURATE CREDIT TRANSACTIONS ACT (FACTA)
FACTA Disclosures
The FACTA Disclosures, which includes the Notice to the Home Loan Application and the Credit
Score Disclosure, were not in the file. The Fair & Accurate Credit Transactions Act, which amended
the Federal Credit Reporting Act, requires brokers/lenders to provide these documents to all
borrowers as soon as reasonably practical.
FAIR CREDIT REPORTING ACT (FCRA)
FCRA Disclosures
The FCRA Disclosures and Notices, which includes the Fact Act Notice to Borrower, Disclosure of
Credit Scores Used in Underwriting of Loan, Opt-Out Notices, Notice of Adverse Action, Risk-Based
Pricing Notice and Investigative Consumer Report Disclosure, were not in the file.
Current Strategies
Now that the audit has found actual violations within the loan, the attorney can start to put together
the client's case for a loan modification.
This is a suggested breakdown of steps to be taken to obtain a loan modification. This is just a basic
outline and should be tailored to your case and situation. This simple structure can be applied to
most all cases.
1. Verify the Violation
It is important to make sure that the attorney has an accurate file from the borrower and nothing is lost or
being intentionally held back. Our forensic loan audit will highlight any violations made in the
origination of the loan. The first thing that should be done is that the violations should be verified. The
forensic loan audit relies on the documents given to the auditors. This means that the auditors only
have the documentation that has been given to them by the client when performing their audit. While we
do our best to make sure all documents have been received from the clients, sometimes clients have
lost documents. If a page was not provided, then it will not be considered as part of the audit. This could
cause our auditors to find a violation when in reality the page is just missing.
The attorney for the borrower should see what the lender has in their files to see if the lenders files
and the borrowers file match. To do this the attorney should send a qualified written request to the
lender upon signing a new client, notifying them of the violation and request any documentation they
have relating to the loan to be sent back to the attorney. This will allow the attorney to verify that
there was a violation. For example, if the audit finds a HOEPA violation because the loan was a high
cost loan and no HOEPA disclosures were made, then the attorney should send the qualified written
request to the lender to determine if the lender has any documentation that the HOEPA disclosures
were in fact made.
2. Qualified Written Request
Assuming that you have sent a written request to see if the lender has the same documentation as the
client, then you should have a qualified written request filed with the lender. If not, then a qualified
written request should be filed at this point notifying the lender of the violation. Once a lender has
received a qualified written request claiming violation of lending regulation they are considered to be
on notice of the violation. The lender then has 20 days to respond to the qualified written request.
The lender then has 60 days to address any claimed violations.
The attorney should lay out in the qualified written request what violations they believe occurred when
their loan was originated, statutes citing the claimed violations, what relief they seek, and contact
information for the legal counsel. The forensic loan audit should be used to determine what violations
have been found and the corresponding statute references. This will legitimize the qualified written
request and give it weight with the lender.
The statute is vague on what actually has to happen within 60 days of receiving a qualified written
request. The lender probably doesn't have to completely remedy the violation within the 60 days, nor
can they just respond with a boiler plate language response dismissing the violation. The lender is
required to come to the table with a working plan that can be agreed upon with some expected
negotiation.
Depending on what sort of workout plan the lender brings to the table will greatly control how an
attorney and their borrower (client) will proceed. If the lender is willing to agree to all the relief
requested in the qualified written request then the attorney and borrower (client) should probably
agree and go forward with a loan modification that reflects the agreed upon terms. However, if the
lender offers only a minor relief then the attorney and the borrower(s) (client) have a few different
options.
3. Making it Cost Effective for the Lender to Give the Borrower a Loan Modification
During the negotiations for the workout agreement, the attorney needs to seriously evaluate the
strength of the case. Some violations are more severe than others. This is important because it will
determine what type of modifications the attorney and the borrower (client) are willing to accept. The
forensic loan audit will greatly assist you in this evaluation by alerting attorney and their borrower(s)
(client) to the frequency and severity of violations.
Bottom line the attorney needs to show the lender that it will be more cost effective to give the
borrower(s) a loan modification than to foreclose on the property or to fight it in court and risk the loan
ultimately being rescinded. This should be approached by showing the lender all the costs that it will
incur by holding onto the loan.
Some of these considerations are:
•
the cost of foreclosure on the home when the borrower(s) ultimately defaults on the loan,
•
carrying cost to maintain the home while the bank holds it awaiting auction (marketing, taxes,
insurance, repairs, security),
•
attorney fees to defend the cause of action should the case go to court,
•
true overhead cost of the man hours the lender will dedicate to this case,
•
lender or Bank required reserves that may have to be met,
•
cost of defending against possible attack on foreclosure claim,
•
cost of negative impact on other holdings in the surrounding area (if bank has loaned in a
concentrated area). Each foreclosure could result in an additional 4% drop in value on
surrounding homes.
If the borrower raises all the different costs associated with the lender holding onto the house and the
lender is still unwilling to give the borrower a modification, then the attorney and the borrower(s)
(client) can then bring a lawsuit, enforcing their rights. The most significant right that the borrower has is
the right to rescind the transaction.
4. Bringing a Cause of Action to the Courts
The attorney has the option of enforcing Truth in Lending Act and other rescission rights in federal
district, state, or bankruptcy court. Of course, the relative advantages and disadvantages of federal
court, state court, and bankruptcy court vary from jurisdiction to jurisdiction. The attorney will want to
choose the court that fits his/her specific situation best. For example, an attorney will not want to file in
bankruptcy court unless s/he is planning on including a bankruptcy factor into the workout
agreement in same way.
Regardless of which court the attorney may choose to file in, the general approach will be the same.
The attorney needs to present their case showing that the lender violated applicable lending
regulations allowing the borrower to rescind the loan. The forensic loan audit can be used throughout the
trial process to highlight and emphasize violations made in the originating loan documents. We also
provide access to expert witnesses who are able to interpret the audit and testify in court as to the
validity and accuracy of the audit.
If the attorney successfully brings a cause of action to the court, the attorney will be able to recover
significant damages depending on the actual violation made in the loan. The ultimate remedy is
rescission, for reasons stated above. Other damages can include actual damages, statutory
damages, attorney fees, and in some cases punitive damages. Recently some courts have also
begun to award loan modifications in cases that equity is required for the loan to be enforceable, such as
HELOC's, and fixed rate Seconds.
ALTERNATIVE CAUSES OF ACTION
Underwriting Standards
We could not determine the debt ratio based on the paperwork provided. Further research into the
variance from the traditional debt ratio of 38% is required. While we do not have access to the
lender's actual underwriting documents, the debt ratio, which is computed by dividing the borrower's
gross monthly income into the borrower's total debt payments, including the proposed mortgage that is
being underwritten, is a key factor used by underwriters to assess the borrower's ability to repay the debt.
It is our opinion that an argument could be made, that the lender possibly should not have made this
loan and put the borrower in a position where there was a high probability of failure, especially when
taking future interest rate increases and changing property values into account.
Duty of Lender and Broker
Supporting Case Law
• Am. Bankers' Ins. Co. v. Wells, 819 So. 2d 1196 (Miss. 2001)
• Charleswell v. Chase Manhattan Bank, NA, 308 F. Supp 2d 545 (D. V.I. 2004)
• Chedick v. Nash, 151 F. 3d 1077 (DC. Cir. 1998) Hilgeman v. Am. Mortg. Securities, Inc., 994 P. 2d
1030(2000)
• Farm Credit Servs. Of America v. Dougan, 2005 S.D. 94 (2005)
• Whittingham v. Mortg. Elec. Registration Servs., 2007 WL 1362669 (D.N.J. May4, 2007)
Unconscionability
The common law contract defense of unconscionability may be applicable, when either the mortgage
terms are unreasonably favorable to the lender or certain aspects of the transaction render it
unconscionable. re Maxwell, 281 B.R. 101 (Bankr. D. Mass. 20O2); Hager v. American Gen. Fin. Inc.,
37 F.Supp. 2d 778 (1999).
Enforcement of Lost or Destroyed Instruments
Attorneys have begun to request that lender produce the Deed of Trust in conjunction with litigation.
The thinking is that if the lender cannot produce the note then the agreement between lender and
borrower is invalid and cannot be enforced.
Breach of Oral Agreement - Campbell v. Machias. 865 F. Supp. 26 (D. Me. 1994).
Translation of Contracts negotiated in language other than English - CA Civil Code
§ 1632(b).
Intentional Infliction of Emotional Distress - FDIC v. S. Prawer & Co., 829 F.Supp. 439,
449 (D.Me.1993)
Negligent Infliction of Emotional Distress - Prawer, 829 F.Supp. 451.
Estoppel - In First State Bank v. Phillips, 13 Ark. App. 157, 681 S.W.2d 408 (1984), the court held
that a bank was estopped from enforcing a balloon payment clause in a note and dismissed the
foreclosure.
Fraud/Misrepresentation
The traditional elements of fraud are frequently more difficult to establish than a deception claim
under an Unfair Deceptive Acts, and Practices (UDAP) statute. However, in some instances fraud
causes of action can be used quite effectively.
People Trust & Saving Bank v. Humphrey, 451 N.E. 2d 1104 (Ind. Ct. App. 1983).
Greene v. Gibraltar Mortgage Investment Corp. 488 F. Supp. 177 (D.D.C. 1980), 839 F.2d 680 (D.C.Cir.
1980).
Mahaffe v. Investors National Security. 747 P.2d 890 (Nev. 1987).
First Charter National Bank v. Ross, 29 Conn. App. 667, 617 A.2d 909 (1992).
Incompetence
Contracts entered into by persons who are deemed incompetent are generally voidable. Krasner v.
Berk, 366 Mass. 464, 319 N E.2d 897 (1974).
A bankruptcy court in Massachusetts, for example, has allowed a debtor to put on evidence as to
whether she was entitled to rescind a note and mortgage based on incompetence. In re Hall, 188 B.R.
476(Bankr. D. Mass. 1995).
Invalid Security Instruments
If the mortgage (or the deed of trust) is not a legally enforceable instrument then there can be no valid
foreclosure.
In re Hudson. 642 S.E. 2d 485 (N.C. Ct. App. 2007).
Ex Parte Floyd. 796 So. 2d 303 (Ala. 2001).
Flagstarv. Gibbons. 367 Ark. 225 (2006).
The validity of security instruments in some community property slates may require both spouses to
execute instruments encumbering a homestead.
In re Larson, 346 B.R. 486 (Bankr. E.D. Wis. 2006).
Breach of Fiduciary Duty - Reid v. Key Bank, 821 F.2d 9,18 (1st Cir. 1987). If established, the
existence of a fiduciary duty gives rise to a duty of fair and honest disclosure of all facts which might be
presumed to influence the consumer to act. Barrett v. Bank of Am. 229 Cal. Rptr. 16 (Ct. App. 1986).
Property Flipping
Lenders may also actively participate in a flipping scheme, particularly when the loans are insured by
the federal government. M&T Mortq. Corp. v. Miller. 323 F. Supp. 2d 405 (E.D.N.Y. 2004). Actual
damages in property flipping cases can be significant. Vaughn v. Consumer Home Mortg. 293 F.
Supp. 2d 206 (E.D.N.Y. 2003).
Appraiser Liability
While sellers are obvious defendants in property flipping schemes, appraisers, with whom
consumers may have had little contact, are essential to the scam. Bird v. Delacruz. 411 F. Supp. 2d
891 (S.D. Ohio 2005). An inflated appraisal is the linchpin of these transactions. United States v.
Owens, 301 F.3d 521 (6th Cir. 2002).
Lender Liability
Lenders may also engage in fraudulent conduct in documenting and underwriting the loan. Consumer
Prot. Div. v. Morgan. 874 A. 2d 919 (Md. 2005).
We have researched 1 he subject of TILA violation from the lender to the borrower to the best of our
ability. If there is any further related case law or other support that you can share with us, please feel
free to let us know and we will incorporate it.
We are continually striving to bring the best and most up to date audit to our customers.
Our recommendation, is for you to complete the interview process which will gather additional
information regarding the loan transaction from inception to closing and to have the audit finalized to
review for compliance with ……………… lender/broker regulations and regulations on restricted
fees, and compliance with HOEPA ("Home Owner's Equity Protection Act") Section 32 High Cost
Mortgages (if applicable), HMDA ("Home Mortgage Disclosure Act') and GSE ("Government
Sponsored Enterprises") then all the information gathered can be forwarded based on your approval.
Again, we strongly advise you to seek the counsel of a reputable attorney, as we are not attorneys
and do not provide legal advice. Our function is only to provide research in connection with potential
predatory lending practices and violations of the Truth in Lending Act and the Real Estate Settlement
Protection Act, any further dissemination of this information must be made by your legal counsel.
Thank you for allowing us to be of service to you and please do not hesitate to contact us if you or
your attorney requires further information or assistance
Sincerely,