A Predatory Lending Examination is a process that involves examining all of your loan documents.  The purpose of the Exam is to "tell the story" of your loan so than a competent attorney can take this information and use it to your advantage, by either negotiating a Loan Modification or filing a lawsuit to stop a foreclosure or institute some other type of legal procedure.

There are two types of Exams:

• Low Level or TILA/RESPA Audit -  This  is the "typical" audit that most companies do.  It is software based, and it looks primarily for Truth In Lending and RESPA violations.  The purpose of this audit is to attempt to achieve "rescission" of the loan.  Rescission means that you cancel the loan.  The problem with rescission is that to cancel the loan, the borrower must be able to "tender an offer", of all money borrowed from the lender, minus all costs of the loan and all payments.  The outcome is to"restore" all parties to a state of being prior to the loan being taken out.  The problem with this method is that in California, most homeowners, for various reasons, have no ability to tender this offer.  Therefore, rescission is ineffective, and Lenders know this.
  
  This audit was originally designed by lenders to show "compliance" with TILA/RESPA so that the lender could sell the loan to Wall Street.  It was very basic and prone to errors.  Most firms have simply bought this type of software for their own uses.
  
• Predatory Lending Exam -   The purpose of this examination is to determine everything that happened regarding the loan.  It identifies not just TILA/RESPA violations, but also numerous other violations designed to allow attorneys to file lawsuits to stop foreclosures and to win damages.  There are very few companies who can do a "quality" Predatory Lending Examination.  This is because to do such an examination, one has to be familiar with court processes and the thinking of lenders and their defensive posturing.
  
  The LFI examination is a Predatory Lending Examination, designed to assist attorneys in the lawsuit.  It is a "Living Examination", constantly being revised due to the increasing case law and also due to LFI developing new tactics and legal challenges for attorneys to use.

The single most important way to determine whether you have been the victim of Predatory Lending or mortgage fraud or deception is through the use of a Predatory Lending Examination. To effectively perform an exam, the examiner must be part detective and part mind-reader. A single residential real estate file can be covered by numerous consumer protection laws and regulations at both the State and Federal level. The applicability of any of these laws will depend on various factors that may, or may not, be evident in the loan file.

The examination is done by a professional familiar with the loan process, forms, regulations, lender practices and loan officer practices. However, most important is that he be familiar with the various laws. To develop a competent "Predatory Lending Examiner", it takes from 8-12 months. This is because each exam is done by hand, reviewing aspects of the loan that no automated software program can detect.

All loan documentation, lender and broker, is reviewed to determine the terms of the loan, compliance with Federal and State Laws, fees, fraud, deception and whether bait and switch might have occurred.  Additionally, LFI will also review the Pooling and Servicing Agreements for applicability.  LFI knows of only two other companies that do the same.

LFI will also examine the Foreclosure Process.  This process is flawed in up to 70% of the foreclosures in California.  

Finally, LFI looks at the Loan Modification Process and will also review the negotiations that occurred, and whether the borrower will be able to afford the loan after any modification.  LFI has found that up to 75% of the homeowners receiving HAMP loan modifications will likely end up in default within 3-4 years.

The results of the Audit are compiled in a summary. This will list all the details of what was expected to happen and what did actually happen. It will cover all discovered violations.  The results are then forwarded to your attorney for review.

Fraud

Fraud can consist at many different levels. It might just be the loan officer lying about the terms of the loan, to falsifying loan applications and income, to outright forgery, backdating of documents, and almost anything other item that you can think of.

Fraud and Negligent Misrepresentation

Were any representations, statements, or comments, written or oral made by the loan officer, broker, notary or anyone else which contradicted the terms of the documents?  Were the loan documents clear and definitive, or could they lead a reasonable borrower to another conclusion as to the terms of the loan?

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 which the lender failed to follow? LFI sees this constantly in a certain type of loan from a specific lender.

Lack of Good Faith and Fair Dealings

Did the lender or broker negotiate or approve the loan with your own interests being considered?

Unfair and Deceptive Acts and Practices

An analysis of various factors in the loan process or even the loan documents that could be actionable under UDAP Codes.

Yield Spread Premium

LFI's unique approach for attacking the payment of Yield Spread Premium to brokers.

Negative Amortization

Another LFI innovative approach for attacking Negative Amortization loans.

Foreclosure Process

Review of the complete foreclosure process.  LFI has determined that up to 30% of all foreclosures in CA are likely unlawful and can be negated with the right attorney.

Loan Modification Process

Was the Loan Modification process done with Good Faith?  Were there limiting conditions that prevented a Loan Modification, yet the Servicer continued to engage in Modifications without intent to actually do a mod?  Could the homeowner afford the final loan modification?

 How To Select A Firm

As a homeowner, this is the most important part for you.  There are many people claiming to do Forensic Loan Audits, but they have no true idea what they are doing. They use software that they plug "the numbers" in, and push a button, and it prints out the results.  This is not a Predatory Lending Audit.

What to ask when "interviewing" a fir.

1. Is the work done by hand? Or by software?
2. How long has he/she been doing examinations?
3. How did he/she get started doing exams?
4. Background of the person.......testified in court?  Previous position?
5. Actual knowledge of statutes, codes, court cases.
6. How he/she supports the attorney after the exam is done?
7. Attorneys or other references. Relationships.
8. "Philosophy" towards exams and loan modifications.
9. What the end result to be expected.  This is a trick question.  If the "auditor" starts to say you will get "this and this" run fast.  There are no guarantees.

The importance of asking these questions is that everything is changing daily in the battle against the lenders.  New strategies and legal courses are being developed, with the intention of bringing the lenders "to the table".  Many of these new findings and techniques are the result of the competent examiner, who is constantly doing research to improve his exams, applying new case law and theories.  If the examiner is not engaged in this, then he is not a true examiner.

Audit Certification

There are now companies in California and Florida who claim to be certified forensic audit firms, or who claim to have certification courses.  DO NOT FALL for this line.  There is no independent agency that "certifies" audits.  This is a marketing tool and nothing else.  Firms who claim to be "certified" will create their own certification process.

There are also firms that offer "courses" in audits.  Do not fall for this either.  A person cannot go to a course for 20-40 hours to learn how to do an audit.  It takes a couple of months to become proficient, even using the limited software.

An LFI examiner takes one year to be at a level whereby he is considered a senior examiner.  Even then, every examination that is done by the senior examiner is reviewed by the owner to determine that it was done correctly.  That is because there are many different way to commit loan fraud, and very few people have the intuitive feel for seeing when fraud has occurred, beyond a basic level.

HOMEOWNER BEWARE:

When you approach a firm about examining your loan documents, be very cautious.  Many firms will do an audit, hand it to you, and leave you to your own devices to figure out what to do.

LFI will not do this.  When a homeowner calls, the person is spoken to in great depth.  The purpose of the examination will be explained.  But most important is that LFI wants to know if you have an attorney.  If you do not have an attorney, LFI will not do an examination for you.  It is that simple.  LFI will not do it. However, we can provide you with a list of attorneys to call.  We do not get referral fees from these attorneys, and would not accept any.  That is because it is illegal to accept referral fees from attorneys.

There is a simple reason for this policy.  Many homeowners are in a position whereby an examination will not help them, no matter what the circumstances. The money that the examination would cost will be needed elsewhere, likely preparing to move to another house, so why should LFI make it any harder for the person?

Another reason for this policy is that many people think that they can use an examination and present it to their lender, who will then modify their loan.  THIS WILL NOT HAPPEN.  Lenders will tell you that there is nothing wrong with the loan and that you can go pound sand.  If you are attempting the loan modification on your own, LFI will not do an exam.

Only an attorney understands how to correctly use an examination, and even then, just a few of the attorneys practicing understand the benefit.  Use caution when selecting such an attorney.  Your home depends upon the right attorney.