Truth in Lending | War on the Home Front

Apr

Editor’s Note: Judges are quick to jump on the TILA Statute of Limitations by imposing the one year rule for rescission and damages. But there is more to it than that.

First the statute does NOT cut off at one year except for items that are apparent on the face of the closing documentation; so for MOST claims arising under securitization where almost every real detail of the transaction was hidden and intentionally withheld, the one year rule does not apply.

Second, the statute of limitations does not BEGIN to run until the date that the violation is revealed. In most cases this will be when the homeowner knows or should have known that the loan was securitized. Since the pretender lenders are so strong on the point that securitization does not affect enforcement, the best point in time for the statute to run is when a forensic analyst or expert tells the homeowner that TILA violations exist.

And THEN, in those cases where the information was hidden, the statute of limitations is three years from the date the information was revealed.

So when you go after undisclosed fees, profits and other compensation of any kind, you are not cut off by one year because — by definition they were not disclosed. The only way the other side can get out of that is by admitting the existence of the fee, and then showing that it WAS disclosed — presumably through yet another fabricated document, signed by a non-existent person with non existent authroity with non- existent witnesses and notarized by someone three thousand miles away (whose notary stamp and forged signature was applied to hundreds of pages of blank documents for later use). [Brad Keiser was the one who discovered this tactic by doing what most forensic analysts don't do --- actually reading every piece of paper sent by the pretender lender and every piece of paper provided by the homeowner. Case law shows that where the notary was improperly applied --- and there are many ways for it to be improperly applied, the notary is void. If the statute requires recording the document in the public records, then the document so notarized shall be considered as NOT being in the public records and is ordered expunged from those records].

This comment from Rob elaborates:

Regarding the TILA Statute of Limitations:

STATUTE OF LIMITATIONS
When a violation of TILA occurs, the one-year limitations period applicable to actions for statutory and actual damages begins to run. U.S.C. § 1641(e).
A TILA violation may occur at the consummation of the transaction between a creditor and its consumer if the transaction is made without the required disclosures.
A creditor may also violate TILA by engaging in fraudulent, misleading, and deceptive practices that conceal the TILA violation occurring at the time of closing. Often consumers do not discover any violation until after they have paid excessive charges imposed by their creditors. Consumers who later learn of the creditor’s TILA violations can allege an equitable tolling of the statute of limitations. When the consumer has an extended right to rescind or
pursue other statutory remedies because a violation occurs, the statute of limitations for all the damages the consumers seek extends to three years from the date the violation is revealed.
McIntosh v. Irwin Union Bank & Trust Co., 215 F.R.D. 26, 30 (D. Mass. 2003).

Filed under: bubble, CDO, CORRUPTION, Eviction, expert witness, foreclosure, Forensic Analysis Workshop, GTC | Honor, HERS, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, workshop Tagged: 215 F.R.D. 26, 30 (D. Mass. 2003)., brad keiser, damages, enforcement, expert, forensic analyst, McIntosh v. Irwin Union Bank & Trust Co., notary was improperly applied, one year, pretender lenders, Public records, rescission, securitization, statute of limitiations, three years, TILA, truth in lending, U.S.C. § 1641(e), violation is revealed

Jul

HOEPA Loans and TILA Mortgage Rescission

By LH | Featured, Truth in Lending

5912 Comments2009-07-10+02%3A46%3A20LH

HOEPA Stands for the Home Ownership and Equity Protection Act

HOEPA is an amendment to TILA that deals with the substantive abuses of creditors offering higher costing home loans to residents in certain geographic areas. The statute was enacted to ensure that consumers most vulnerable to abuse would be afforded a safety net without impeding the flow of credit altogether.

There are certain trigger points to determine if a loan is a “HOEPA or Section 32″ Home Loan.

Triggers for HOEPA Coverage

APR more than 10% above comparable Treasury security rate (8% on first-lien loans closing on or after October 1, 2002) on the 15th day of the month before the lender received the loan application. 12 C.F.R. 226.32(a)(1)(i); 66 Fed. Reg. 65,617 (2001).

“Points and fees” exceeding 8% of the “total loan amount.” 12 C.F.R. 226.32(a)(1)(ii).

Some examples of Points are:

All prepaid finance charges. 12 C.F.R. 226.32(b)(1)(i);

All compensation paid to mortgage brokers. 12 C.F.R. 226.32(b)(1)(ii);

All items paid to the lender or to a lender affiliate. 12 C.F.R. 226.32(b)(1)(iii);

Disclosure Requirements

A special HOEPA disclosure notice must be delivered to the consumer at least three business days prior to the closing of the loan. 15 U.S.C. § 1639(b); 12 C.F.R. 226.31(c). A signed statement to the effect that the consumer received the HOEPA notice creates a rebuttable presumption only. 15 U.S.C. § 1635(c). The notice must inform the consumer that he/she need not enter into the loan, and that if he/she does enter the loan, he/she could lose the home and any money put in it. 15 U.S.C. § 1639(a); 12 C.F.R. 226.32(c)(1).

The notice must also include an accurate statement of APR, monthly payment and balloon payment amount, and maximum payment amount on a variable-rate loan. 15 U.S.C. § 1639(a)(2); 12 C.F.R. 226.32(c)(2)-(4); Official Staff Commentary 12 C.F.R. 226.32(c)(3)-2.

Prohibited Terms

The following terms or actions are prohibited (or limited) by the statute and Regulation Z: prepayment penalties, default interest rate, balloon payments, negative amortization, prepaid payments, negligent lending, direct payments to home improvement contractors. 15 U.S.C. § 1639(c)-(h); 12 C.F.R. 226.32(d).

Remedies

Failure to deliver the required HOEPA notice or inclusion of a prohibited term triggers an extended (three-year) right of rescission (described above; also called TILA Mortgage Rescission). 15 U.S.C. § 1639(j); 12 C.F.R. 226.23(a)(3) n.48.;

In addition to regular TILA monetary damage remedies, HOEPA violations give rise to “enhanced” monetary damages under 15 U.S.C. § 1640(a)(4), namely, all payments made by the borrower.

PLEASE NOTE: Remember that if you have a HOEPA rescission case, this effectively gives you a double deduction– you get to deduct all payments made twice before getting to your “HOEPA-adjusted” tender amount (once in calculating the TILA tender amount, and once in calculating HOEPA damages). Also, if you’re beyond three years and can’t rescind, you can still raise a HOEPA claim and deduct all payments made in the nature of defense by recoupment.

As with any TILA violation, the rescission remedy runs against any assignee of the loan. 15 U.S.C. § 1641(c). In addition, where the loan documents demonstrate that the loan is covered by HOEPA coverage, assignees “shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor.” 15 U.S.C. § 1641(d)(1). This provision mirrors the FTC Holder Rule and creates assignee liability for all state and federal claims and defenses. For monetary damages claims under TILA, it provides an exception to general rule that violations must appear on the face of the documents.

Statute of Limitations

1 year for affirmative claims.15 U.S.C. § 1640(e);
3 years for rescission.Beach v. Ocwen, 523 U.S. 410 (1998);
Unlimited as a defense to foreclosure in the nature of a claim in defense by recoupment

Jul

Beware of Scam “Forensic” Loan Auditors/Companies

By LH | Featured, Forensic Loan Audits, Truth in Lending

586157 Comments2009-07-09+01%3A59%3A43LH

Ok, here we go go again… now the scams have hit the loan auditing industry. Most of these fakers are ex-mortgage brokers who didn’t make it in the mortgage industry and are now looking for a new way to make money. There are a few good auditors out there who have really put in the time, effort and research to actually know the laws and know how to properly state the elements of these violations in a manner that can actually help a homeowner in a foreclosure matter (and can help an attorney bring these violations as affirmative defenses or counterclaims in a foreclosure case).

TILA or supposed “Forensic” Audits that use standardized check-off lists without providing a mathematical determination of the TILA Disclosure Statement and amounts are NOT Forensic Audits. A check-off list or automated/software-driven TILA Audit describing potential violations as “Serious,” or “Moderate” is incompetent and useless. A Forensic TILA Audit must provide accurate TILA; Regulation Z citations, case law precendent, as well as actual computation of all settlement service fees properly allocated in the TILA Disclosure Statement or the Audit will NOT withstand scrutiny by legal authorities. Do not be fooled by imitations using standardized check-off lists.

There is absolutely nothing “forensic” about plugging loan data into some software and having it spit out a report. But that is exactly what most of these fakers are doing and they are charging anywhere from $395 to $995 based on what I have seen so far.

If the loan audit will NOT stand up to legal scrutiny then you have wasted your money and someone has scammed you into believing you were paying for something that would help you. Why would you pay for a loan audit that would not stand up to legal scrutiny?

The software driven report serves a limited purpose and I use a popular banking compliance software for my audits as well but this software-driven report is only a small piece of my actual audit and findings report. A true forensic auditor examines every document relevant to the loan and looks at signatures, dates, parties on the documents, who provided those disclosures or documents and also obtains the story from the client because every loan is a story. It involved people and usually quite a bit of communication between the borrower and the indispensable parties to the transaction.

I have myself setup for Google Alerts on a number of search terms so I go to these other websites pretty frequently. I also get clients who have dealt with some of these fraudsters and now want my help to clean up the mess and the wasted money. Hopefully this post will cause those who read it to really do some good checking before they part with hard-earned money.

Bottom line is to make sure you follow your gut. Do your homework, ask questions, ask for references. A good auditor will most likely have attorneys they work for and consult for.

Feel free to contact me if you have any other questions on this topic or would like a sample of my audit reports. You’ll be able to see the true forensic nature of a good audit vs. these computer-generated reports.

May

Foreclosure Rights – Basics in Homeowner Foreclosure Defense

By LH | Foreclosure Defense Research, Foreclosure Rights, Forensic Loan Audits, Truth in Lending

5623 Comments2009-05-19+13%3A50%3A29LH

By Lane Houk
May 19, 2009

I realized this morning that it’s been a while since I’ve covered the basics of foreclosure defense. For those of you readers who are behind in their mortgage and trying to work something out with the lender (who is usually just the servicer of your loan, not the owner), you should beware that MOST of these institutions do not deal with you, the homeowner in good faith. Every time I see the news media covering some ridiculous thing they call “reporting” of the facts, fair and balanced or whatever, what they “report” is that banks are hurting, the government is going to save the “people” from this mess and servicers are doing everything they can to help. Call this number, call that number and you’ll get help. Go to this government site, or that for more information… yadda yadda yadda.

If you’re reading this right now then you or someone you know is in serious hard times, you’re thinking that it must just be you and your family having such a hard time because the news is telling you how many people are getting help, you’re just not one of them.

Try again. I’m in this fight everyday with regular American people. Hard working types… and they’re trying to survive right now. But it’s not easy. Hopefully this blog can help you get pointed in the right direction…

Regarding foreclosure, you first need to know: If you’re state is a judicial state or non-judicial state. It makes a big difference in HOW the foreclosure process plays itself out. CLICK HERE for a great resource chart on this.

Basically, if you’re in a judicial state, the party claiming a right to foreclose files a lawsuit in the local court system and you’ll get served with that lawsuit. Defend yourself. In what other lawsuit would you just lay down and die. A wise person defends them self against any and all lawsuits that are filed against them. Right?

If you’re in a non-judicial state, no court case is needed. It usually starts by the part serving you with a Notice of Default. The deed in your name is probably being held in trust and will be turned over within a statutory time frame once the state laws have been followed to do so.

My expertise is in the Florida process. Florida is a judicial state. So for this article’s sake, I’ll go through the foreclosure process for Florida.

Step Two: You’ve been served with foreclosure papers (ie. the complaint). Now what? You have 20 days to respond to this lawsuit (30 days in some states). You also have 30 days to dispute the debt under your federal rights found in the Fair Debt Collection Practices Act (you may also have state collection laws that afford your rights as well). So, in other words, you have a right to dispute the exact amount they claim that you owe THEM.

Remember. You have 20 days to respond. Don’t mess around with this. If you’re in danger of missing that deadline, at least file a Motion for Enlargement of Time which is legalese for “I need more time to get my answer filed because I’m still searching for counsel to take my case.”

Which leads me to Step Three: Get an attorney! Hire one, find one but please make sure they know foreclosure defense, really. Ask them how many cases they’ve taken. Be wise, hire an attorney. If they’re being fair to you and not gouging you on the fees, hiring them will save you money, not cost you. Contact me if you don’t understand why or how…

Step Four: Read the entire complaint you were served. You need to read it and try to understand it. Don’t be fool in life… there are far too many people who just don’t take the time to learn and understand how things work. Some because of fear, some become of laziness. Neither is good, ever, but especially when you’re being sued for a lot of money.

What comes next is kind of like a game of ping pong. They file the complaint… you answer the complaint, ball is back on their side, you wait to see what they hit back at you, etc. etc.

This is also the point where every case takes on a life of its own. There’s really no set way that a foreclosure case goes from here. However, generally speaking, the Plaintiff in the case is going to attempt to get a “Summary Judgment” in the case. This is legalese for quick judgment against you. No issues of material fact present. They win, you lose and you have future financial liability with the deficiency if one will exist after they sell the home.

I’ll make the biggest point of the article right here: Most of the Plaintiff’s in these cases DO NOT, I repeat, DO NOT own the Note that they say you defaulted on. These plaintiffs are either servicers or trustees – both agents for a securitized trust. More than this, I see sloppy, missing and even fabricated paperwork filed by the attorneys representing these big institutions; or they have outsourcing companies to do their dirty (paper) work. You know, plausible deniability stuff. Just beware… if they don’t own the loan, they’ll act like they do and create documents (like an assignment of mortgage) out of thin air to make it look like they do. If you think I’m kidding, just CLICK HERE to read an article by Peg Brickley from Dow Jones and posted online at the Wall Street Journal; this article briefly exposes just a bit of what companies like Fidelity National Information Services are doing in the loan default business boon.

A good auditor/investigator knows what to look for, what documents to inspect and where to find the securitized trust documents – or how to get them.

If you and your attorney are successful in defeating summary judgment, this is a big victory. This is what a good attorney is going to do first. Win the smaller battles and you might win the war. Summary judgment is the first battle in a foreclosure case. Look at every other type of civil or criminal case in our court systems and you’ll find that Summary Judgment is rarely granted. I said rarely and you can check that.

Now compare that with civil foreclosure cases… what you’ll find is that Florida judges are granting plaintiff’s motion for summary judgment in MOST cases. Foreclosure is just another type of civil case… why the MAJOR disparity in this? You think the judges don’t have an opinion about this. There are some rare good ones who actually appreciate the law and respect due process rights of citizens and aren’t going to let these institutions just walk into court and do whatever they want with no respect for the lawful process a foreclosure is supposed to go through.

So to have the best chance at defeating summary judgment, the defendant needs to establish (for the record) genuine issues of material fact. These are your affirmative defenses and there are many standard ones that attorneys should be using and there are some “big bullets” if you will that can be quantified through a forensic analysis and audit of all loan documents, notices and disclosures by the lender, servicer, broker, title company, etc. It’s a rare occasion that I don’t find violations. These violations are absolute issues of material fact. Summary judgment would be improper and there is well established case law on this in Florida.

Once summary judgment is denied, this foreclosure case has to go to a full trial. A good attorney files comprehensive discovery on your case. I mean comprehensive too. I want every document that pertains to this loan. It’s all material… I want the transfer records of the Note, the PSA, the Prospectus and Registration Statement, the accounting records, etc. etc. etc.

These documents once requested need to be produced or the court can be moved to compel the plaintiff to produce. Yes, their attorney will try to make some garbage up about the information requested is proprietary or can’t be produced due to privilege or whatever. This is when you can tell these guys just thumb their nose at due process and say we don’t think the consumer deserves it or has a right to it. This is also when you know they’re hiding something. First off, it’s not proprietary knowledge, its PUBLIC DISCLOSURE! It’s a loan that you say some six to seven figure number is owed by the defendant, the documents for these transactions have to be disclosed to the SEC, the IRS, shareholders, certificate holders, trustees, servicers, custodians, master servicers, depositors, issuers and several other federal agencies. But the borrower has no right to see these documents and have them produced for the record in the lawsuit against them. Right. Give me a break.

This game of ping pong can carry on for many months and often times a year and more. The bottom line to this: YOU HAVE FORECLOSURE RIGHTS! You have a right to due process. You have a right to defend yourself and you should! Find the professionals to help you and fight the war on the home front!

May

Recoupment: A Powerful Claim in Foreclosure Defense

By LH | Foreclosure Defense Research, Foreclosure Rights, Forensic Loan Audits, Homeowner Resources, Truth in Lending

495Leave a Comment2009-05-18+01%3A51%3A49LH

By Lane Houk
May 18, 2009

If you are a practicing attorney: Are you using Defense by Recoupment under 15 U.S.C. 1640(e) as a strong affirmative defense for your clients?

If you are a consumer: Have you had your loan (from day of application to current) audited by a forensic consumer debt analyst?

I get a fair amount of “conspiracy theory ” calls or emails people who would swear that the CIA was covertly involved in the loan they signed for and that all measures of fraud occurred against them by everyone involved and… you get the point. My first question to this person is always: “Great, so are you prepared for the $15,000+ retainer a good attorney is going to want to spend their time investigating, quantifying, pleading and trying a case like that? Well, you know the answer…

Others have read (or have heard) that a loan audit and violations of the TILA can only help you if it’s a refinance loan on a primary residence in the last three (3) years. To have the EXTENDED RIGHT TO RESCIND, these conditions must be in place but rescission isn’t the only thing that can help someone in (or in danger of) foreclosure.

When it comes to defending yourself against foreclosure the first order of business is to establish clear and genuine issues of material fact in the case. In a Florida foreclosure defense strategy, the client wants to quantify these genuine issues of material fact in the foreclosure case because no judge should ever grant a motion for summary judgment. Why?

In the state of Florida, there is extensive established law that prevents summary judgment from being granted when there are outstanding issues of material fact. Johnson v. Boca Raton Community Hosp., Inc., 985 So.2d 141, Murphy v. Young Men’s Christian Association of Lake Wales, Inc., 974 So.2d 565. A “material fact,” for summary judgment purposes, is a fact that is essential to the resolution of the legal questions raised in the case, Continental Concrete, Inc. v. Lakes at La Paz III Ltd. Partnership, 758 So.2d 1214.

Successfully defeating summary judgment is a big score in favor of the consumer and can greatly improve the chances of obtaining a viable and fair workout and thus ultimately, avoiding foreclosure.

So, one area of practice Lane Houk and his team help consumer attorneys with is by completing a forensic loan audit on the client’s loan documents from the day they applied for that loan through to current day. Why would a foreclosure client want this done? Let’s think about it…

Often times, the client did not receive proper “pre-closing disclosures” under both Truth in Lending laws (TILA) and Real Estate Settlement Procedures Act (RESPA);
Especially when there was a mortgage broker or interim lender involved
The actual “lender” in the transaction was under same timeframe obligations to make specific disclosures to client from the day they received application
The many servicing abuses which could have taken place from day of closing to current
Insufficient amount of certain disclosure violations
Escrow mishandling abuses (I’ve seen people nearly lose their house to a bona fide mistake the bank made but wouldn’t budge until a good attorney got involved)
The list goes on…

Under the TILA civil liability section [15 U.S.C. 1640(e)] regarding violations it says that any action under that section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation. But, that subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment…

A consumer can only bring an action for damages within one year from the date of closing. However, the consumer is not barred from bringing a claim as a “matter of defense by recoupment” in a foreclosure action because a foreclosure action is an action to collect the debt. (ie. almost all foreclosure complaints are served with some level of disclosure that “this is an action to collect on a debt”) however NOT disclosing that does not necessarily preclude that any such action is NOT an attempt to collect on the debt.)

Any such quantified claim of a violation of the TILA (Truth in Lending Act) from an expert audit report should be brought as an affirmative defense by the attorney. This is a rock solid issue of material fact. No summary judgment. The lender will have to bring the action all the way through to trial. This should give you much greater leverage to obtain a workout. At the very least, this give you/your client much greater time in the house and time to try to work something out that works for both parties; something that is much needed these days because I still see a great deal of servicer abuse/misprepresenations happening every single day.

When it comes to auditors, remember that as with any professional, most often you will get what you pay for. If you have some company offering you an audit for a couple hundred bucks, you’re going to get that level of expertise and report back. A good expert auditor and their service should be in the $750.00-1000 price range. More or less than that just be careful.

I hope this little insight gives you some ideas on how you can help yourself in a foreclosure case. If you want more information on forensic loan audit, please call me at (800) 985-4685 ext. 2 or by email at Lane@thePatriotsWar.com

May

TILA Mortgage Rescission – How to Stop a Foreclosure

By LH | Featured, Forensic Loan Audits, Homeowner Resources, Loan Modification, Truth in Lending

52515 Comments2009-05-08+01%3A10%3A48LH

If you want to know HOW to STOP a Foreclosure, a Truth in Lending Act (TILA) Mortgage Rescission is the key.

I was on the phone yesterday with a loss mitigation rep from Washington Mutual Bank. I was calling to get the specific address to send a “Notice of Rescission” to for WAMU. Every lender/bank/servicer has specific addresses for these types of correspondence.

I asked the lady in Loss Mitigation for the “address that I can send a rescission notice to.” At first, she said, “a what?” “A notice to rescind the loan” I said. “Sir, you can’t rescind a loan” she said. I said, “ma’am, please just give me the address I can send an official notice to rescind the loan to.” She says, “why? did you just close on this loan within the last three days because I’m pretty sure you can’t just cancel a loan.”

I said, “ma’am you most certainly can, up to three years from the date of closing actually if it’s a refinance loan of a primary residence and there are certain violations of the truth in lending act; but I’m not going to argue with you, just give me right address!”

This little back and forth madness just goes to show how even the banks don’t know the damn law! A legal right to TILA mortgage rescission can extend up to three (3) years out from the date of closing if:

It’s a REFINANCE loan transaction
It’s on your PRIMARY residence
It was closed in the last THREE years
A forensic loan audit reveals a MATERIAL disclosure violation

Many people ask me how to stop a foreclosure… folks, TILA mortgage rescission is a COMPLETE defense to foreclosure. In fact, it is the most POWERFUL foreclosure defense you could have. Why?

When you effect a TILA mortgage rescission, you are literally and legally canceling the loan. Here’s exactly what Regulation Z says,

12 C.F.R. § 226 et seq. (“Reg. Z”)
(a) Consumer’s right to rescind. (1) In a credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section.

(2) To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business.

(3) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures,⁴⁸ whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer’s interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.

⁴⁸ The term “material disclosures” means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total payments, the payment schedule, and the disclosures and limitations referred to in §226.32 (c) and (d).

TILA mortgage rescission is real. But I haven’t explained to you yet WHY TILA mortgage rescission is a complete defense to foreclosure. Here’s what Reg. Z says, then I’ll explain:

12 C.F.R. § 226.23(d)
(d) Effects of rescission. (1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.

(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.

(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer’s option, tender of property may be made at the location of the property or at the consumer’s residence. Tender of money must be made at the creditor’s designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer’s tender, the consumer may keep it without further obligation.

(4) The procedures outlined in paragraphs (d) (2) and (3) of this section may be modified by court order.

Don’t know if you caught that above but I bolded it for you. Yes, that’s right the mortgage (the security interest) becomes VOID. Further, the borrower is NOT responsible for ANY finance charge. That means any/all closing costs and interest paid on the loan from closing to current is refunded to the borrower as a credit against the original loan amount.

So, let’s get to the foreclosure defense issue… the mortgage gives the owner of the Note the legal authority to foreclose. If the mortgage is voided, there is no longer any legal instrument to foreclose on. The creditor becomes unsecured just like a credit card creditor. The security interest has been voided by operation of law. Foreclosure becomes a legal impossibility.

The lenders don’t just roll over and go away but folks, if they violated the federal law in your loan transaction, its black and white. It’s not some subjective he said, she said issue. It’s recognizable and quantifiable. You absolutely want a forensic loan audit done by a knowledgeable analyst. If you’d like to retain me for my audit services, go to my contact page and get a hold of me.

Hopefully, this short post will help you see that a valid TILA mortgage rescission is the best remedy and defense to foreclosure if you qualify for it!

Apr

What is a “Forensic Loan Audit?”

By LH | Forensic Loan Audits, Truth in Lending

4962 CommentsWhat+is+a+%22Forensic+Loan+Audit%3F%222009-04-28+02%3A52%3A49LH

Definition of the word ”Audit“

A systematic, independent and documented process for obtaining evidence.
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.

Definition of the word “Forensic”

Relating to, used in, or appropriate for courts of law or for public discussion or argumentation.
Of, relating to, or used in debate or argument; rhetorical.
Relating to the use of science, specific methods or technology in the investigation and establishment of facts or evidence in a court of law:a forensic laboratory.

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 non-compliance.

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 ), the vast majority of cases settle out of court quickly.

Even non-material disclosure violations or violations over a year old can still be used as claims and defenses in recoupment in a foreclosure defense. (See 15 U.S.C. § 1640(e)) – these claims and affirmative defenses raise genuine issues of material fact sufficient to survive any motion for summary judgment.

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 Lane Houk’s Proprietary Methods and Technology results in the most comprehensive and thorough audit reporting process of its kind that reveals ALL violations of Federal and State Codes including RESPA, TILA, HOEPA and ECOA along with detailing EVERY VIOLATION, its severity, and the specific law/regulation in violation in an easy to read format. ALL of the forensic loan audits reports can reveal these guiding queries:

Was 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 description of some of the most common are:

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

We can help you 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

In my experience, there are very few auditors out there who truly know the “forensic” aspects of the loan audit process. The real litmus test is to ask the auditor where most of their business comes from? If it’s not from consumer law attorneys walk away. Ask for attorney references at all times.

Jan

Loan Modification: It’s All About “Leverage”

By LH | Featured, Loan Modification, Truth in Lending

3053 Comments2009-01-25+23%3A15%3A21LH

Leverage: the power or ability to act or to influence people, events, decisions, etc.; sway; to exert power or influence on.

We all know by now that the lenders and loan servicers are acting in bad faith with borrowers. What’s new? Many of these loans were given to un-suspecting borrowers in bad faith to begin with. It always was, and is, about money with the root being greed. I am working with a borrower right now, a pastor and his wife, who were given a refinance loan back in 2006. They were looking for some cash out on a fixed rate loan. Unknowingly they were put into a “Pick a Payment, Option ARM” loan. A loan that adjusts monthly but has a “fixed payment” option. The broker who sold them loan sold it to them as a fixed “payment” loan – they were looking for a fixed rate.

Should they have read the loan closing documents more carefully? Sure, hindsight being 20-20. But they trusted this individual and the integrity of his company. Have you ever read every document in a closing package? I have. But most mortgage brokers and closing agents haven’t even done that… a typical borrower is reading a foreign language -practically speaking.

So, back to the word “leverage.” I have found that there’s only ONE WAY TO DEAL WITH A LENDER OR SERVICER… with the gloves off. Meaning you have to treat them as an adversary and deal with them the way they are truly dealing with you. Don’t believe what you are hearing from some voice on the other end of the 800# you called. Folks, it’s just this simple: they don’t care one iota about you. Their only motivation is money and they do NOT deal in good faith.

So what’s this issue of Leverage? I have found one thing to be true in dealing with these institutions… the little guy needs leverage to win. They hold the cards until you start putting some in your hand. Shifting the deck simply takes a methodical and strategic approach to dismantling their case – in other words, building leverage. Gaining the “ability” to influence or “sway” their decisions (on your loan).

So, if you want a “workout” of your loan, a loan modification, you need to gain this ability to influence and sway their decision making process. How you ask? Find all the holes in their case, find all the violations of state and federal laws and put them to task. They will fail most of the time because they don’t think that it matters. Why? Because they don’t think you have what it takes to take them on? They don’t think you belong at the same poker table.

The question that really matters? Are they right or wrong?

I start with a very sophisticated Qualified Written Request – QWR. They have very strict timelines to adhere to on a QWR and must answer your bona fide questions of fact. Next I go after the loan closing and disclosure documentation. 8 out of 10 or more loans have violations. Let’s start itemizing those violations, 1, 2, 3, 4… and so on. These are federal violations and usually one can find some state law violations such as Unfair and Deceptive Trade Practices. Look for a fraudulent appraisal, look for kickbacks to other settlement providers. Every violation is a shift of the deck. Leverage.

If you want help modifying your loan… if you want help shifting the deck… if you want to find the violations and put them to task, email me. “I’m your Huckleberry.”

Jan

Your best chance at a real Loan Modification – TILA Rescission

By LH | Loan Modification, Truth in Lending

1464 Comments2009-01-17+18%3A12%3A02LH

I wrote a post similar to this yesterday. It was a post on TILA rescission that referred to a married couple who rescinded their loan AFTER foreclosure was filed. They subsequently filed a Chapter 13 bankruptcy as well. The lender (Option One Mortgage Corp. – division of Wells Fargo) balked and refused to honor the rescission. The borrowers filed an Adversary Proceeding in bankruptcy court and won. CLICK HERE to read the full post.

This post is focused on alerting America’s homeowners who want to stay in their homes (but cannot afford the payment anymore) of the BEST REMEDY you may have. This is not for the proverbial “deadbeat” who just wants to cheat the system and live for free. However, there are much fewer of those kinds of people than those that can afford the payment might think. Millions of Americans are losing their jobs, being laid off, having their salary and overtime cut back while the costs of living have increased. The cost of living has been increasing (ie. inflation) for quite a while. From insurance costs to groceries to the costs of labor. Because of this cost of living increase, many fixed income families were forced to start living partly on credit cards. By the way, had this “credit” not been available in the first place, I don’t think we’d be where we are today. Supply and demand will keep the economy in check unless you can artificially fuel demand with borrowed money that someone can’t really afford to pay back.

Because of these extra credit payments and loss of income or a job, millions of families are on the verge of foreclosure or already there. If this is where you (or a friend/family member) is at, you MAY have one very powerful remedy to force the lender/servicer to work with you.

This remedy is called “TILA Rescission.” TILA stands for the “Truth in Lending Act.” It is the major piece of federal legislation that regulates lending practices of financial institutions. A borrower may have the “extended right to rescind” a loan for UP TO THREE YEARS FROM THE DATE OF CLOSING.

It is important to note that a loan can ONLY be rescinded when:

The loan is a refinance transaction;
Funded in the last three years
On the borrower’s primary residence;
When a “material disclosure violation” is found

The term “material disclosure violation” is a very important component. Many people (including self-proclaimed experts in loan auditing) think that “any” violation of the Truth in Lending Act gives someone the right to rescind. That is patently wrong. The four conditions above must be true in order for the borrower to have the possible “extended right to rescind” the loan transaction. There are only 4 potential “material disclosure violations.”

Many homeowners don’t want to just “walk away.” They want to stay in their home. The bad news is that these lenders are run by criminals. Literally. They’re getting billions in bailout money. They’re getting millions to billions more in insurance payouts on defaulted debt. Homeowners who are trying to save their homes are running into the brick wall of GREED. Loss mitigation departments are being run by a bunch bungling fools who don’t even know how to answer a phone much less deal with a homeowner with dignity and respect. The corporate bottom-line is driving our country to the bottom.

So, if you’re like me, when you’re backed into a corner, you take the gloves off and you come out swinging. I think that Congress and corporate America really does underestimate the average American patriot. That’s their first and biggest mistake.

If you want to fight the battle to save your home… if you want to go on the offense, then TILA Rescission is one great weapon to fight with. You need to have an audit of your loan file done by someone who really knows what they’re doing. Most of the businesses and people out there claiming to know what they’re doing, don’t. Beware. If someone is trying to charge you over $750 for an audit, don’t just beware, don’t do it.

With a professional audit of your loan closing file, the auditor is investigating for material disclosure violations. If one is found, you have the right to rescind the loan – if the loan has been closed in the last three years and it was funded on your primary residence.

The loan is rescinded by sending a “rescission letter” to the servicer, the originator of the loan and any special servicer(s) that may need to be notified as well.

This puts the screws to the lender immediately and they end up in a real quagmire. TILA is meant to be a “self-enforcing” statute. This means that the lenders are supposed to enforce it on themselves. They are not allowed to sue a homeowner to get around the self-enforcing nature of the statute. Doing so is another violation. The only thing a lender can do is to “seek judicial guidance” in a TILA rescission claim.

In practice, when a homeowner rescinds the loan and IF they have a competent attorney well-versed in TILA, they are going to be asked by the lender or opposing counsel to submit a “proposal.” Folks, this is legal-speak for we’re willing to modify your loan, send us a proposal.

If you truly want a loan modification, a workout of your existing loan, a payment reduction plan, this is THE best and most powerful remedy one can have. Not all homeowners qualify and not all loans will have a material disclosure violation. I can tell you that I find material disclosure violations in greater than 50% of all loan packages I audit.

You have to be very careful to ensure that the “chain of custody” of your loan documents is protected. This is one main area a lender’s attorney will try to attack in an attempt to discredit the claim by saying that the documents could have been lost or altered because the homeowner, auditor and/or attorney for the homeowner were careless in preserving the integrity of the original loan copy package they received from the closing agent. A good attorney and auditor should have procedures and systems in place to combat this potential attack and preserve integrity of the documents.

If you have any questions about the loan audit process or would like to inquire about a professional mortgage loan audit, contact me by email at Lane@LaneHouk.com

DISCLOSURE: I am not an attorney and nothing in this post should be construed as legal advice. Seek out an attorney for any questions pertaining to legal matters. I audit loan files for violations and have education and training in this area of practice. I work with competent consumer-based attorneys who handle legal matters for clients and provide audit report services for consumers and a select group of attorneys.

Jan

UPDATED! – TILA Rescission Case – Bankruptcy Judge Finds in Favor of Borrower

By LH | Court Cases, Truth in Lending

1305 Comments2009-01-17+04%3A06%3A36LH

Below is my original post from January 2009.

This case was just upheld in July 2009 so this is good case law for federal bankruptcy courts. Obviously there may be some judges in different districts who won’t like it or may not adhere to it because it’s not their district. This case should be good if you have to appeal if that’s the route the judge takes but this is great news for homeowners who have rescinded, tendered correctly and the lender/assignee did not respond as per the statute.

At the very least, a trail has been blazed and there is now a federal case which really follows the statute as it is truly written – which is in favor of the consumer.

CLICK HERE to read the case.

By Lane A. Houk
January 16, 2009

The Little Guy (David) vs. the Big Guy (Goliath). These classic battles are being waged in the “War on the Home Front” every single day. The subject of this post is a case that goes to the win column for the Little Guy. We are fighting for our freedom, our country, democracy… we are fighting against corporate and political corruption. I hope you are fighting too. This is a war for our rights and our homes and our American way of life. It’s all under siege folks. Don’t be fooled into complacency.

This is one of the most powerful cases I have read in a long time. CLICK HERE to read the actual case order from the Judge in the Adversary Proceeding. The borrower in this case rescinded the loan transaction because an audit of their closing documents revealed a “material disclosure” violation as is defined in 15 U.S.C. §§ 1601 et seq. (“TILA”) and its implementing regulations at 12 C.F.R. § 226 et seq. (“Reg. Z”).

Once the Consumer rescinds, the security interest arising by operation of law becomes void automatically. The promissory note is also voided since it is part of the same “transaction.”

The borrower in this case had foreclosure filed against them. After retaining an attorney for the foreclosure, the attorney advised them to have an audit of their loan closing file which revealed a material disclosure violation. It is important to note that a loan can ONLY be rescinded when:

The loan is a refinance transaction;
Funded in the last three years
On the borrower’s primary residence;
When a “material disclosure violation” is found

The borrower in this case was given an insufficient amount of the Notice of Right to Cancel. A borrower should receive two (2) copies of the Notice.

If a married couple is identifiable on a Universal Residential Application, then each consumer is entitled to rescind and must be given a copy of the TILA Disclosure Statement with all material information accurately and correctly disclosed, 15 U.S.C. § 1602(u); Reg. Z § 226.23(a)(3) n.48, and two (2) copies each of the rescission notice, 15 U.S.C. § 1635(a); Reg. Z § 226.23(b), irrespective of whether both are obligated on the note (or either, for that matter).

In this case, the borrowers were married and received only 2 copies total. Material disclosure violation. Thus they rescinded. The lender Option One obviously contested the matter.

Once the Consumer rescinds, the security interest arising by operation of law becomes void automatically. The promissory note is also voided since it is part of the same “transaction,” see i.e., 15 U.S.C. § 1635(b) and Reg. Z § 226.23(d)(1).]

This is powerful folks. This is a complete remedy to foreclosure. The mortgage is the security interest and it is the mortgage (and the mortgage only) that gives the lender the right to foreclose. In a rescission, the lender must void the mortgage within 20 days. If it does not, it is another violation of TILA.

After rescinding the loan the borrowers also filed a Chapter 13 bankruptcy. The lender refused to rescind the loan. The borrowers filed an Adversary Proceeding in the Bankruptcy Court. Bottom line: The judge heard all arguments from both Plaintiff (borrower) and the Defendant (Option One). The judge found in favor of the borrower/plaintiff and determined that they had the right to rescind. Victory number one.

But a BIG ruling in this case was that since they had rescinded the loan, the loan became an “unsecured” debt since the mortgage was automatically voided as per TILA. Since the debt became “unsecured” it was able to be discharged through bankruptcy like any other type of unsecured debt such as a credit card debt.

The moral of the story: TILA Rescission is the most powerful remedy to foreclosure if/when the borrower has this remedy afforded to them. The key is to obtain a loan audit by a real expert. Call/email me if this is something you want to do. I encourage you to read the Adversary Proceeding Case. It is highly enlightening.

Jan

Loan Rescission and TILA Violations

By LH | Court Cases, Foreclosure Defense Research, General, Homeowner Resources, Truth in Lending

797 CommentsLoan+Rescission+and+TILA+Violations2009-01-11+03%3A36%3A56LH

I recently started a blog post about TILA Violations and what these violations can mean for the financial institutions. This is a BIG can of worms for them because a large percentage of home loans were funded in violation of the federal TILA statute and its implementing regulations found in Regulation Z.

In short, if a TILA violation is found within 3 years of closing on a refinance transaction of the borrower’s primary residence, the debtor/borrower can “rescind the loan.” By serving notice to the lender of the debtor’s action to rescind the loan, the lender has “20 days to return all finance charges, downpayment monies, etc.” to the borrower and must also “remove all security interests on the property” in 20 days.

If the lender fails to do so, it is in violation of TILA requirements, mainly 15 USC §1635 and, according to paragraph “b” of this section, there are some huge implications for both debtor and creditor if the creditor does not comply with these requirements.

Here’s a sample case that you can read as evidence of how powerful this remedy can be: Belini v. WAMU

Call or email me if you want help pursuing a TILA violation against you. These are cases for attorneys to take up and we have an extensive network of attorneys that we can help you get in touch with.

Jan

And the Truth (in Lending) Shall Set You Free

By LH | Foreclosure Defense Research, Homeowner Resources, Loan Modification, Truth in Lending

61Leave a Comment2009-01-11+02%3A00%3A18LH

In the midst of the mortgage meltdown, I’m searching for every tool that might provide a lever to modify a mortgage. In every case involving a home, I’m inquiring about when the existing loans were made, since the borrower has three years from the transaction to rescind a loan for violations of the Truth in Lending Act – if it is their primary residence and a refinance loan.

The neat thing about TILA violations is that they are strict liability causes of action: the aggrieved borrower doesn’t have to prove they were defrauded or misled, or that they had actual damages. The fact that the disclosures were defective or inadequate in amount gives the borrower the right to rescind the loan and deprives the lender of the right to interest on the loan. Pretty powerful stuff.

Powerful stuff is what we need to keep people in their homes: tools to bring the lender to the table to revisit the loan and find an alternative to foreclosure. Because absent some sort of restructuring, a tremendous number of these impossible loans will otherwise be foreclosed. In the long run, a foreclosure benefits neither party.

My small, unscientific sample says that I am finding TILA violations in at least half of the loans I’m reviewing these days. TILA doesn’t apply to financing of investment property, but for me, it’s the family homes that I’m intent on saving.

So, if you have a loan taken out in the past three years, gather all of the documents you got at closing and give me a call at 1-800-985-4685 to get the transaction reviewed for Truth in Lending compliance. Once those three years are past, there is little that TILA can do for you.

You need to really read what I’m about to quote from part of TILA – otherwise known as The Truth in Lending Act. This excerpt comes from 15 USC §1635 (a)(b) and (f). With our expert attorneys in our network, we can help homeowners who have refinanced in the last three years look for TILA violations. If any are found, the below excerpt applies to your situation. This is POWERFUL!

TITLE 15 > CHAPTER 41 > SUBCHAPTER I > Part B > § 1635Prev | Next

(a) Disclosure of obligor’s right to rescind
Except as otherwise provided in this section, in the case of any consumer credit transaction (including opening or increasing the credit limit for an open end credit plan) in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.

(b) Return of money or property following rescission
When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor’s obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.

(f) Time limit for exercise of right
An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor

TILA Statute of Limitations — No Limit