SCOPE OF THE AUDIT

Secure Audit Groups’ (SAG) Evaluation for Violations of “RESPA”

The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. It requires lenders to give a good faith estimate (GFE) of all closing costs that borrowers must pay. It was designed to help borrowers from being forced to pay “hidden fees” at closing. Typical violations of RESPA include (1) Statutory Damages, (2) Attorneys fees, and in many cases (3) Treble Damages [i.e. 3 times the amount.]

Secure Audit Groups’ Evaluation for Violations of “TILA”

The Truth in Lending Act (TILA) requires lenders to disclose the terms of a loan, including the total amount of the loan, the annual interest rate, and the number, amount and due dates of all payments necessary to repay the loan. The TILA also requires additional disclosures and places many restrictions on mortgages. The most often sought remedy under TILA is rescission of the loan.

Secure Audit Groups’ Evaluation for Violations of “FCRA”

The Fair Credit Reporting Act (FCRA) was designed to prevent inaccurate or obsolete information from entering or remaining on a credit report. The law requires credit bureaus to adopt reasonable procedures for gathering, maintaining and disseminating information. Commons remedies for violating FCRA are (1) statutory damages and (2) Attorney fees

Secure Audit Groups’ for Violations of “ECOA”

The Equal Credit Opportunity Act (ECOA) was designed to ensure that all qualified people have access to credit and prohibits discrimination based on sex, marital status, age, race, national origin, or public assistance benefits received.

Secure Audit Groups’ Evaluation for Violations of “HOEPA”

Home Ownership Equity Protection Act state and local high costs. Federal (HOEPA), state and local high cost thresholds. Secure Audit Group compares the loan data collected during a forensic loan audit to the calculated high cost thresholds as defined by the Home Ownership and Equity Protection Act (HOEPA) and applicable state and local jurisdictions.

Secure Audit Groups’ Evaluation for Violations of “Underwriting Standards”

The purpose of an underwriter is to determine whether the borrowers can qualify for a loan and if the borrowers have the ability to repay the loan. This determination of the ability to repay a loan is based upon employment and income in large measure, which is proved by getting pay stubs, 1040’s, W-2’s and a Verification of Employment and Income on the borrowers.

If an underwriter has evaluated the loan properly, then there should be no question of the ability of the borrower to repay the loan. Debt ratios will have been evaluated, credit reviewed and a proper determination of risk made in relation to the loan amount. Approvals and denials would be made based upon a realistic likelihood of repayment.

Secure Audit Groups’ Evaluation for Violations of  “PREDATORY LENDING”

The terms “abusive lending” or “predatory lending” are most frequently defined by reference to a variety of lending practices. Although it is generally necessary to consider the totality of the circumstances to assess whether a loan is predatory, a fundamental characteristic of predatory lending is the aggressive marketing of credit to prospective borrowers who simply cannot afford the credit on the terms being offered.

While such disregard of basic principles of loan underwriting lies at the heart of predatory lending, a variety of other practices may also accompany the marketing of such credit.

Targeting

Targeting inappropriate or excessively expensive credit products to older borrowers, or to persons who are not financially sophisticated or who may be otherwise vulnerable to abusive practices, and to persons who could qualify for mainstream credit products and terms

Loan Flipping & Equity Stripping

Repeated refinancing of borrowers into loans that have no tangible benefit to the borrower. Can be the same lender or different ones. Loans and refinances whereby equity is removed from the home through repeated refinances, consolidation of short term debt into long term debt, negative amortization or interest only loans whereby payments are not reducing principle, high fees and interest rates. Eventually, borrower cannot refinance due to lack of equity.

High Debt Ratios

This is the practice of approving loans with high debt ratios, usually 50% or more, without determining the true ability of the borrower to repay the loan. Can often be seen with Prime borrowers approved through the Automated Underwriting Systems.

High Loan to Value loans

Loans offered to a borrower having little or no equity in the home. Usually adjustable rate mortgages that the borrower will not be able to refinance out of when the rate adjusts due to lack of equity.

Fraudulently Caused to Execute Loan Documents

Adjustable rate mortgage loan was an inter-temporal transaction on which Plaintiffs had only qualified at the initial teaser fixed rate, and could not qualify for the loan once the interest rate terms change.

Deception, Fraud, Unconscionable

Is marketed in a way that fails to fully disclose all material terms. Includes any terms or provisions which are unfair, fraudulent or unconscionable. Is marketed in whole or in part on the basis of fraud, exaggeration, misrepresentation or the concealment of a material fact.  Includes interest only loans, adjustable rate loans, negative amortization and HOEPA loans.

Stated or No Income/No Assets

Is based on a loan application that is inappropriate for the borrower. For instance, the use of a stated-income loan application from an employed individual who has or can obtain pay stubs, W-2 forms and tax returns.

Lack of Due Diligence in Underwriting

Is underwritten without due diligence by the party originating the loan. No realistic means test for determining the ability to repay the loan. Lack of documentation of income or assets, job verification. Usually with Stated Income or No documentation loans, but can apply to full documentation loans.

Inappropriate Loan Programs

Is materially more expensive in terms of fees, charges and/or interest rates than alternative financing for which the borrower qualifies. Can include prime borrowers who are placed into subprime loans, negative or interest only loans. Loan terms whereby the borrower can never realistically repay the loan.

Mandatory Arbitration Clauses

Pre-dispute, mandatory, binding arbitration clauses limit the rights of borrowers to seek relief through the judicial process for any and all claims and defenses the borrower may have against the mortgage lender, mortgage broker, or other party involved in the loan transaction.

Secure Audit Group Evaluates Each File for Violations of “Common Law Principles”

CONSTRUCTIVE FRAUD

Material facts include the terms of the loan, whether there is a prepayment penalty, or any other information which a reasonable borrower would want to know before accepting the loan. Did the broker or loan officer or anyone working for the broker or loan officer fail to disclose any material facts to the borrower?

FRAUD AND NEGLIGENT MISREPRESENTATION

Were any representations, statements, or comments, written or oral made by the loan officer, broker, notary or anyone else who contradicted the terms of the documents?

NEGLIGENT MISREPRESENTATION

When a mortgage professional makes errors which a reasonably diligent mortgage professional would not have made, he or she may have made a negligent misrepresentation.

BREACH OF CONTRACT

The note and its attachments are a contract. The broker must follow all the terms of the contract such as the way the interest is calculated, and the penalties it assesses. Were there any terms in the contract?

BREACH OF FIDUCIARY DUTY

And the list goes on… For residential Audits please view the following below.

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