A WARNING ABOUT HUD/FHA QUALITY CONTROL OF LOANS AND UNDERWRITING
Audit the loan files to see borrower payments are current when it is streamline finance or make sure the borrower brings the money to make it current at closing. Remember the loan must be current before it goes into streamline refinancing.
HUD looks for borrower cash back after loan closing by the company or by the loan officer in excessive amounts beyond the guidelines.
Be certain the final HUD-1 in the company file and the one in the case binder agree with each other. If not, find out why. I assure you HUD will check. I also assure you that HUD, especially HUD-OIG does contact the borrowers when there are discrepancies regarding borrower payments to close on the lender loan file and the FHA Case Binder.
Be certain you conduct your loan review sampling within 90 days of closing. HUD does count the days to make sure you do.
HUD checks your quality control plan to be certain it is up to date. If your plan is up to dale then it should have, among other things, provisions that state checks are made for:
- Not employing or contracting with anyone under debarment, suspension or LDP or otherwise prevented from participation in HUD-FHA programs.
- A section showing reports are given to senior management within one month of completion and actions taken by management to cure timely.
- All findings of fraud reported to HUD within 60 days.
- Section that states lender will identify early default patterns by location, program and loan characteristics.
- The section on quality control of loans must state it will include loans from all loan officers, appraisers, processors and underwriters as well as real estate agents on purchase money transactions.
- Loans that default in six months must be 100% audited.
Remember, HUD will interview current employees, ex-employees and borrowers to validate data or its findings. So be sure your loan files are good and your HUD Quality Control Manual is up-to-date.
WHEN IN BANKRUPTCY COURT THE PERSON FORECLOSING HAD BETTER BE ABLE TO PROVE THEY OWN THE NOTE OR NO FORECLOSURE
In August 2006, Shellie Veal signed a promissory note secured by deed of trust in favor of GSF Mortgage Corp., covering property in Illinois. On June 29, 2008 Shellie and her husband filed a Chapter 13 bankruptcy listing American Home Mortgage Servicing Inc. as a secured creditor. On July 18, 2008 American Home filed a proof of claim on behalf of Wells Fargo Bank as its servicing agent. American Home attached documents to the proof of claim including copies of the Note showing an assignment from GSF and a letter signed by the vice president of American Home stating it had acquired the mortgage.
The Veals objected to the letter’s consideration as evidence, contending American lacked standing and that it failed to establish that either American or Wells Fargo had been qualified as holders of the note. On Oct. 21, 2008, Wells Fargo filed a motion for relief from stay to allow it to foreclose on the property submitting the same documents. The Bankruptcy Court granted the relief from stay over objections stating the documents presented adequate showing wells owned the note and deed of trust. The Veals appealed.
The 9th Circuit Bankruptcy Appellate Panel said reversed. Wells has standing to seek relief from the automatic stay if it has a property interest in, or is entitled to enforce or pursue remedies related to, the secured obligations. Neither Wells nor American was the initial payee of the Note, and therefore, each was required to demonstrate facts to establish standing as interested parties. None of the documents submitted by Wells established its status as the holder or an entity with any interest in the Note, failing to show it or its agent, had actual possession of the Note. Relief from stay is therefore improper. (Veal v. American Home Mortgage Servicing, Inc. (In re Veal), U.S. Bankruptcy Panel, 9th Cir. No. 10-1055, 6-10-11)
Watch how notes and deeds of trust are assigned. In this case GSF assigned the Deed of Trust and the promissory note to Option One. However, the assignment from Option One to Wells Fargo stated it transferred “the following described mortgage, securing the payment of a certain promissory note(s) for the sum listed below, together with all rights therein, and thereto, all liens created or secured thereby, all obligations therein described, the money due and to become due thereon with interest, and all rights accrued or to accrue under such mortgage.”
Noticeable by its absence is the assignment of the promissory note itself, which is the obligating instrument.
FEDERAL COURT IN NORTHERN CALIFORNIA APPROVES $3.1 MM AMERISAVE MORTGAGE SETTLEMENT
Plaintiffs brought a class action lawsuit against Amerisave Mortgage Corp., a Georgia corporation alleging that Amerisave improperly charged property appraisal fees and application cancellation fees to plaintiffs who had applied unsuccessfully for mortgage loans or locked-in mortgage rates available through the Internet. (Sonoda, et al.,etc. vs. Amerisave Mortgage Corporation, a Georgia corporation, 3-11-cv-01803 EMC; 11-8-12)
Do not charge fees on cancellation or up front unless your attorney advises it as legal and at that you should have an agreement and be sure you are complying with the Dodd-Frank Act and Truth-in-Lending.
IF YOU ARE GOING TO SUE A CALIFORNIA MORTGAGE BROKER BECAUSE A PROMISSORY NOTE SECURED BY DEED OR DEEDS OF TRUST DID NOT PERFORM BE SURE YOU DO IT TIMELY OR YOU WILL NOT COLLECT