In a nutshell, what we do is rip apart the mortgage looking for anything that will assist you or your attorney in helping you keep your home, level the playing field in a modification negotiation or help you negotiate a short sale. We are just a compliance and securitization investigative company. We are not attorneys and we do not give legal advice nor do we assist in any type of negotiations for modifications. We just simply give you and your attorney the tools to negotiate a modification or defend a foreclosure action. Once the review is complete, we will refer you to an attorney that can assist you fighting the foreclosure or help with the modification
The Compliance Review consists of reviewing to see if any federal or state laws were violated when the loan was being originated. This includes RESPA, TILA, FDCPA, Section 5 of the FTC Act, HOEPA, which covers high cost loans, Consumer Protection Act and any state statutes. We also look for UCC violations. Compliance is important because the way the loan was structured dictates how or if it could be sold on the secondary market.
Compare With Lender Documents
Unlike our competitors, we look at more than just the closing documents you received at your closing. We order the documents directly from the mortgage servicer. We do this for two reasons. One, because the examiner wants to make sure the lender’s documents match what you received at closing. For example, the Truth-In-Lending statements, mortgage, note and all the disclosures must have identical figures and statements. Two, to ensure your signature is consistent throughout the whole file. This is because 9 out of 10 times you were given unsigned copies of their documents at closing due to the fact they were prepared prior to the closing.
We do this for multiple reasons. We want to see if the value was pushed higher than its actual value. This plays an important role. An argument could be made that says you are overpaying on the mortgage because the loan is based on a percentage of the value. For example, when you walk into either the broker or the lender’s office, the loan officer already knows what program you can receive based on your credit report, what LTV you qualify for and how high of a dollar value they need to get the file closed. In most cases, it is the lender or the broker who order the appraisal and the appraiser is all too happy to oblige them since it means more business.
A fraudulent appraisal is also important because an argument can be made that the underwriter for the originating lender should have caught any appraisal problems and therefore the loan should not have been funded. If the loan was securitized, the Depositor’s (the entity putting the transaction together on the secondary market) due diligence department should have caught any problems in the appraisal (or any other problems) before assigning the loan into a Trust.
The first thing the examiner does is to check the chain of assignments filed with the county where the property is located. In many states, only the owner of record is allowed to foreclose. The owner of the mortgage must be recorded in the county records before a foreclosure can be initiated and proper chain of ownership must be evident. The examiner also checks for “robo-signing”. Robo-signing is when a signature of the person signing the mortgage assignment or affidavit does not belong to the person signing the document. Examiner also verifies the signatures of the Notary who claims to have witnessed and verified the signature of the individual who signed the mortgage assignment or affidavit.
Mortgage Backed Security Trust
The securitization process is essentially what happens after the loan is closed and the initial lender has sold off your loan. In most cases you now have two main parties of interest involved in the file. The Servicer acts as collection agent for the Trustee who oversees the Trust. A Trust is another name for the mortgage pool your loan is in. This means you could have Bank of America servicing a loan that is owned by Wells Fargo with JPMorgan-Chase acting as the Trustee for Wells Fargo. For example the trust could read: JPMorgan-Chase National Trust as Trustee for Wells Fargo Asset Backed Security 2007-A1B1.
Examiner reviews the prospectus. This is important because this is the instrument that is used by the Depositors in the sales pitch to prospective investors for the mortgage-backed security the note is in. It specifies what types of loans will be placed in the pool. For example, the prospectus may dictate the trust will only accept 30 year fixed mortgages.
If the loan doesn’t fit into the perimeters of the Prospectus then an argument can be made that the loan was fraudulently securitized and therefore the ownership of the note is invalid. This is kind of like buying a stolen car. If you buy a stolen car even unknowingly, it’s not your car.
The Pooling and Servicing Agreement
The examiner investigates is the Pooling and Servicing Agreement or PSA. The PSA is important because it defines the relationship between the Trustee, Depositor and the Servicer. It specifies who the Master Servicer is and who is allowed to be a sub-servicer and if what authority they have to modify or foreclose on your loan and if they do or do not have to seek investor approval.
The PSA also specifies if there is an insurance policy in place to protect the investor in case the loans in the pool stop performing or if the bond rating of the pool drops. It will also specify what the triggers are that activate the policy that pay off the investors. If this does happen then an argument can be made that the mortgage is now paid. This is similar to you getting into a car accident and totaling your car. The insurance company pays off the lien holder and the lien is extinguished. Your debt is now considered paid.
This is important because if the Trust is paid in full by the insurance policy, then the outstanding balance of the pool is now paid including the client’s mortgage. If it does happen, usually the servicer will buy the note for pennies on the dollar and still attempt to keep collecting payments on the note. If this does happen you may have a cause of action against the servicer for fraud.
The examiner reviews all filings, schedules and exhibits to see if the note is actually in the Trust. If the note is not in there, then its game over for the Trustee and the servicer because now you as the homeowner have absolute proof the lender lacks legal standing to execute the terms of the mortgage. This also has the possibility of setting up the law firm handling the foreclosure for a claim of defrauding the court and misrepresentation.