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What is a Forensic Loan Audit?

DEFINITIONS of the word "Audit":

A systematic, independent and documented process for obtaining evidence.

A formal examination of an organization's or individual's accounts or financial situation. An audit may also include examination of compliance with applicable terms, laws, and regulations.

The physical review of practice records to determine if the practice has been (and is being) compliant with carrier requirements.

Loan servicing complaints

Section 6 provides borrowers with important consumer protections relating to the servicing of their loans. Under Section 6 of RESPA, borrowers who have a problem with the servicing of their loan (including escrow account questions), should contact their loan servicer in writing, outlining the nature of their complaint. The servicer must acknowledge the complaint in writing within 20 business days of receipt of the complaint. Within 60 business days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. Until the complaint is resolved, borrowers should continue to make the servicer's required payment.

A borrower may bring a private law suit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6's provisions. Borrowers may obtain actual damages, as well as additional damages if there is a pattern of noncompliance.

According to the Truth in Lending Act even a small mistake with calculating the borrower's annual percentage rate could be an actionable violation, enabling the borrower to rescind the loan. Therefore, the threat of a lawsuit is often sufficient to persuade an otherwise uncooperative lender to negotiate an attractive work out with the borrower. Because the Truth-in-Lending Act (TILA) requires all attorney fees to be paid by the predatory lender (in which a new servicer is now the responsible party ), and the vast majority of cases settle out of court quickly.

Until recently Forensic Loan Examinations were only made available to large banks and lending institutions wanting to determine their own exposure to risk and potential legal liabilities prior to purchasing large pools of mortgage loans.

Providing the loan audit gives homeowners more ammunition so they can stand a chance in negotiating a decent modification with lenders who have far more resources than the average borrower and often play hardball unless they are faced with the risk of a costly lawsuit.

A Forensic Mortgage Loan Audit using U.S. Lender Audit, and a Proprietary Technology, results in the Most Comprehensive and Thorough Audit Reporting system of its kind that reveals ALL violations of Federal, State, County and Municipal Code including RESPA, TILA, HOEPA, ECOA, and Tangible Net Benefit, detailing EVERY VIOLATION, their severity, and the specific Code in violation in an easy to read format. ALL of the forensic loan audits reports can reveal thse guiding queries:

FRAUD INVOLVED?

� Constructive Fraud

� Misrepresentation

� Victim of Bait and Switch

� Straw Buying Victim

� Steering

� Appraisal Fraud

Common Abuses:
Predatory mortgage lending involves a wide array of abusive practices. A brief descriptions of some of the most common are:

Excessive Fees
Abusive Prepayment Penalties
Kickbacks to Brokers (Yield Spread Premiums)
Loan Flipping
Unnecessary Products
Mandatory Arbitration
Steering & Targeting
Breach of Contract

WE CAN HELP FIND OUT

Did the loan officer accurately disclose the loan terms to you?
Did you sign a separate broker fee agreement?
Was your home's value inflated by the lender's appraiser?
Did the lender fail to verify your ability to repay the loan?
Were you given all federal and state disclosures?
Were you properly notified of your right to cancel the loan?
Do your closing documents contain any technical errors?
Were you charged excessive or undisclosed fees?
Has your loan been sold without your knowledge?
Any and all applicable federal and state law violations
The real terms of your loan
Outline of hidden fees and/or commission earned by your broker or lender
A complete assessment so you can pursue possible legal claims against your broker and/or lender
Report of all factual findings of the forensic audit

We Also help provide:

� Expert Witness Servicing

� You to Engage in direct conversations with Examiner

� Join our new weekly conference calls as a professional to better understand your market and education of industry and more

83% of Mortgages Have Violations.
Know the Facts!

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RECENT FILES AUDITED:

ACTUAL AUDITOR NOTES:This is a Hybrid Option Arm loan that allows 120% negative amortization. The servicing
disclosure was in the file, however, the initial Good Faith Estimate and the initial Truth in
Lending disclosures were not in the supplied documents. As all three of these documents are
required to be disclosed to the borrower within 3 days of the application, there is some
evidence that this may not of occurred. Additionally, this loan allowed a negative amortization
that would bring the loan balance to exceed the appraised value.

ACTUAL AUDITOR NOTES: In section One of the Note "1. BORROWER'S PROMISE TO PAY" the principal amount was blank. This would indicate that there is no consideration provided for this loan. The documents
provided included a "Limited Power of Attorney" to correct paper work mistakes. However that
POA excludes changes in the loan amount or terms.

ACTUAL AUDIT NOTES:The audit report produced a number of loan exceptions. Most of the exceptions were produced
because of the limited number of documents provided in the audit. This was a stated income
loan. The application provided show the previous housing expense at $2600.00 and the new
housing expense over $9000.00. This payment shock is unacceptable without some
explanation by the underwriter as to how the borrower was to meet this obligation. This loan
should not have been made.

ACTUAL AUDIT NOTES: This transaction was a ten year interest only First Lien Mortgage Loan. The amount of the loan was $279,500.00. This amount is within the conventional limits and is covered by the State or Federal Home
Ownership Equity Protection Act.This loan was made for a new home built by Lennar Homes. Lennar Homes
also owns the loan origination company, the lender and the title company used in this transaction.
The documents provided did not include a notice of Affiliated Business Disclosure required when two or
more of the participants rendering services on a home mortgage are related by ownership of 1% or
greater.

Controlled and Affiliated Business Arrangements (ABA)
An "affiliated business arrangement" (ABA) or Controlled Business Arrangement is defined in RESPA as
an arrangement where a person who refers settlement services has an "affiliate relationship" or "an
ownership interest of more than one percent in a provider of settlement services."

Why an ABA not disclosed a RESPA Violation
HUD tacitly understands that there are circumstances where a borrower's interests are best served by
working with entities who "bundle", or package, services. If the process results in lower costs for the
borrower, it is obviously advantageous to use a provider who can add value. For HUD, the concern is in
areas where the borrower ends up paying more, not less, for services. The Controlled Business
Arrangement is a circumstance where, if unmonitored or unregulated, borrowers could be steered to a
provider which does not add value, but adds cost, where upon in this circumstance both the loan
originator and the lender charged origination fees causing a higher cost to the borrower.
This transaction violates RESPA 3500.15

ACTUAL AUDIT NOTES: The borrower's did not show on their application sufficient funds to close the loan. There is no
explanation for the additional funds. The payment shock on this loan was three times the
amount that the borrower had been paying. This in addition to the poor payment and credit
history of the borrower, made this a questionable loan and the lender should not have made
the loan.

ACTUAL AUDIT NOTES: This is a 30 year adjustable rate mortgage amortized over 40 years with a balloon payment at
the end of 30 years. The HUD-1 provided in the review was changed and "penciled in" without
any acknowledgment by initialing by the borrower. The review package also included only one
copy of the borrower Right to Cancel. Two copies are required by the TILA law. Additionally,
the GFE estimate provided at closing indicated the loan term was 480 months with and
amortization period of 480 months. This was wrong as the term was 360 months and
amortization period of 480 months. The fees charged by the broker were excessive and are
indicative of an loan transaction provided to benefit the broker over the needs of the borrower.

ACTUAL AUDIT NOTES: This is a 3/27 adjustable rate loan that refinanced with cash out a previous
loan that had only four months of seasoning. The borrower had good credit with a mid score of 717.
While legally permitted, this loan had excessive broker fees ($14,700.00) and the borrower could have
possibly qualified for a fixed rate product with a similar interest rate and loan terms with lower
fees. The broker would have difficulty passing the RESPA test for justifying the work that the
fees represented.

ACTUAL AUDIT NOTES: The Notice of Right to Cancel was not completed. The notice did not have a rescission date. This loan may be rescinded.

ACTUAL AUDITOR NOTES: The file contained only three copies of the "Borrower's Right to Cancel", there should have
been four copies or two copies for each borrower. The loan was originated by the borrower as
the borrower was a loan officer for the lender. This is not an industry "good practice" and
should have not been allowed. The borrower also provided a letter to the lender detailing the
reason for the refinance. The letter claimed the borrower wanted to replace their adjustable
rate mortgage with a fixed rate mortgage. This was a refinance of an adjustable rate mortgage
with a new adjustable rate mortgage. As the cost of the refinance was going to increase the
overall housing expense, it is difficult to understand how there would be a "net tangible
benefit" to the borrower.

ACTUAL AUDITOR NOTES:
This was a re-finance of an existing mortgage loan. The Right of Rescission or the Right to
Cancel provided in the file did not have a rescission date. Additionally only one copy was
provided. Under the TILA law, in a consumer refinance transaction, two copies of a disclosure
of Right of Rescission, disclosing the process and the date in which the borrower must exercise
that right, must be given to each borrower at closing. Based upon these documents, the TILA
law was violated and the borrower can rescind the loan. There is a Failure on the HUD-1 as
both the originator and the lender charged processing fees. It is sometimes common to see the
lender charge a small document review fee, but this was not the case. The deed of trust has
the borrower as a married woman. California is a community property state and the spouse
should have a right of rescission disclosure. This was not in the file.

The file contained only one copy of the right of rescission. The copy was not complete. It failed
to show the date of the transaction, or the date of the truth and lending disclosure or the date
of receipt of the Right to Cancel Notice. It also failed to show the date by which the rescission
period expires. Additionally, because California is a community property state, there should
have been two notices for each borrower or both married individuals. The application did not
indicate the borrower income, this would indicate a high level of irresponsibility on the part of
the lender as this would mean the lender accepted the borrower with no income.

The borrower was not qualified at a higher interest rate.
The borrower's interest rate, currently, and at the time of Application is 7.500%.
Debt-to-income ratio is very high at 7.500% and can increase to 10.500% in June
2009, and can increase 1.00% each year thereafter. The borrower was not
qualified for the interest rate ceiling of 13.500%.

The Adjustable Rate Mortgage Note includes inconsistent
mortgage terms.The loan documents indictate that the interest rate will adjust annually based on
a 6-month LIBOR index. Based upon industry standards and accepted practices,
the index should match the frequency of the interest rate adjustments, in this
case, the index should be a 1 year LIBOR.

It appears that the borrower was charged excessive fees at
closing. For each loan, the borrower was charged 4% for origination fees on the HUD-1
Settlement Statement. However, on the Good Faith Estimate, the 4% total fees
included origination fees, discount fees, and mortgage broker fees totaling 4%.
The HUD-1 does not differentiate the individual fees from the origination fees.

Mortgage Affordability Estimates-This was estimated by using the income stated on the
loan application.According to this estimate the borrower could afford to purchase a house
valued at $245,531 at the initial rate of 7.500% and a house valued at $159,294 at the ceiling
rate of 13.500%.

Based on the information provided in the file the borrower would need to have a yearly income
of $135,597.28 inorder to qualify for this loan. The borrower's income as shown on the loan application
is $9,840.84 per month or$118,090.08 per year.

U.S. Lender Audit Sample

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