Advocates for Consumer Affairs, a compliance and risk management firm that audits mortgage loans nationwide, said it plans to concentrate their efforts to make sure homeowners receive loans that are enforceable from financial institutions.
Conducting forensic loan audits against lenders can help clean up the mess left behind by the mortgage meltdown, as well as safeguard against a future disaster. In addition, audits will likely change how the lending business operates today since courts recently gained power to demand loan modifications on behalf of homeowners.
“The need for fairness and justice exists among the millions of homeowners who are unknowing victims of predatory mortgage lending,” the Advocates for Consumer Affairs said. “Our goal is to empower consumers with the necessary knowledge and ammunition to 'fight back' against their 'bad loans' in order to protect their 'American Dream'.”
A forensic loan audit is a process that breaks down and analyzes a set of loan documents to determine if all parties completed proper procedures and complied with regulations during the origination of the loan. Audits also make it easier for lenders to recognize certain patterns connected to a single broker and help even the playing field for lenders when negotiating principal reductions, interest rate reductions and loan modifications on behalf of their clients' homeowners.
“The system will be more tightly regulated and focused on loan quality, rather than loan quantity. Lenders will seek brokers who consistently produce loans that perform,” the Los Angeles-based firm said in a press release.
For example, when a property is upside down and the homeowner is facing foreclosure, the homeowner has more leverage than they may realize to receive a loan modification if an audit is conducted against the lender. The firm said large portions of principle, typically 50% to 80%, could be removed by auditing a lender.
According to the firm, homeowners need to prove what the maximum payment is that they can afford by constructing a financial plan that the lender will approve, while the lender needs to forgive the delinquent payments or put them on the back of the loan since they know the homeowner is often late with their payments or currently in foreclosure.
“Most major lenders and service providers will negotiate a loan modification where most of the delinquent payments and foreclosure fees are either wiped out or added onto the back end of the loan,” the firm said. “In most cases the interest rate and payment will be reduced permanently.”
Mortgage audit findings can also move a non-judicial foreclosure action into jurisdiction, meaning the foreclosure process will be handled through the court system. There are 29 states currently using the non-judicial process.
“Borrowers, regardless of financial hardship and payment history, now have the chance for a better position to negotiate new terms or loan settlement,” Advocates for Consumer Affairs said. “We identify and expose those deceptive, fraudulent, abusive and predatory lending practices that plague consumers, many of which can be uncovered within your mortgage loan documents.”
