It's been all over the news since California State Attorney General Jerry Brown made the latest announcement in foreclosure scams. "Forensic Loan Audits" are solicited to homeowners in danger of foreclosure but have not been proven to give an advantage in obtaining loan modification from the bank, he says.
A forensic loan audit is conducted by specialist, and entails pouring over all of the loan documents given to the borrower at the time or origination or in response to a qualified written request. The loan audit can sometimes be as complex as the loan documents themselves, outlining the bank's failure to comply with federal laws such as the Real Estate Settlement Practices Act ("RESPA") and the Truth in Lending Act ("TILA").
When loan modifications were new, a few years ago, forensic loan audits may have mattered. But they don't anymore. Loan servicers only care about your eligibility for loan modification under the Obama Housing Plan and your ability to pay the modified monthly loan payments. AG Brown is right to advise homeowners to be wary of foreclosure consultants who claim that a forensic loan audit will improve the chance of securing loan modification. '
This is not to say that forensic loan audits are completely without merit. For example, a loan audit can be of value to someone who honestly wants to know if or how they were taken advantage of when they
if you are considering filing a lawsuit against your bank, a forensic loan audit is absolutely necessary. You, or your attorney, must determine the state and federal violations which occurred before, during and after the loan closing in order to a court action against your bank. At QMS Law, we will consider your situation and determine whether a forensic loan audit is appropriate for your situation. We will not recommend one unless you need one.
Thursday, February 25, 2010
Wednesday, February 10, 2010
FTC seeks to implement its own version of "SB-94"
The Federal Trade Commission is currently seeking input, particularly from attorneys, as to a proposed law that would prevent loan modification providers from charging fees up front. The law would allow loan modification companies to collect money only after the services are provided.
"Homeowners facing foreclosure or struggling to make mortgage payments shouldn't have to contend with fraudulent companies that don't provide what they promise," said FTC Chairman Jon Leibowitz. "The proposed rule would outlaw upfront fees so companies can't take the money and run."
I agree with him in that the last thing that struggling homeowners need to worry about is being defrauded. But I disagree that the best way to address this problem is by preventing loan modification providers from earning any money. In my opinion, the best way to prevent fraud would be to draft specific regulations that loan modification providers must follow. For example, loan modification company may not advertise that a modification is 100% guaranteed. Or, private loan modification companies must disclose that they are not affiliated with government-funded organizations. The FTC could compile these regulations in an easy-to-read 1 page notice that could be sent to homeowners by banks or mortgage companies prior to initiating foreclosure proceedings.
As discussed in my previous posts, banks are simply taking too long to evaluate borrowers for loan modification and in many cases, denying borrowers based on arbitrary or incorrect information. In many cases, the process can drag on for more than one year. What business can sustain itself without getting paid for one year? None.
The regulations proposed by the FTC would have a chilling effect on loan modification providers, homeowners and ultimately, the economy as a whole. Homeowners will be forced to face the banks alone, will have no recourse when they are denied (in many cases, wrongfully denied), and finally, will face foreclosure and lose their homes. I'm sure that lobbyists for the banks are thrilled.
"Homeowners facing foreclosure or struggling to make mortgage payments shouldn't have to contend with fraudulent companies that don't provide what they promise," said FTC Chairman Jon Leibowitz. "The proposed rule would outlaw upfront fees so companies can't take the money and run."
I agree with him in that the last thing that struggling homeowners need to worry about is being defrauded. But I disagree that the best way to address this problem is by preventing loan modification providers from earning any money. In my opinion, the best way to prevent fraud would be to draft specific regulations that loan modification providers must follow. For example, loan modification company may not advertise that a modification is 100% guaranteed. Or, private loan modification companies must disclose that they are not affiliated with government-funded organizations. The FTC could compile these regulations in an easy-to-read 1 page notice that could be sent to homeowners by banks or mortgage companies prior to initiating foreclosure proceedings.
As discussed in my previous posts, banks are simply taking too long to evaluate borrowers for loan modification and in many cases, denying borrowers based on arbitrary or incorrect information. In many cases, the process can drag on for more than one year. What business can sustain itself without getting paid for one year? None.
The regulations proposed by the FTC would have a chilling effect on loan modification providers, homeowners and ultimately, the economy as a whole. Homeowners will be forced to face the banks alone, will have no recourse when they are denied (in many cases, wrongfully denied), and finally, will face foreclosure and lose their homes. I'm sure that lobbyists for the banks are thrilled.
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