Why is a RESPA or TILA audit worthless ?
* Stated Income or SISA loans are typically calculated using the wrong income and assets. The amount needed to qualify is usually over inflated. NLS is certain that no one disclosure based on APR can be correct without the proper income included.
Therein lies the biggest problem for the lender, its successors and assigns. Nearly every disclosure is wrong.
What should I look for in my loan file?
· Tough question...even for an attorney.
So where do I start?
· Ask around. Find a loan examiner with underwriting experience. Ask a lender what they will look for today (versus last year) for qualifying a borrower.
What are the most critical documents to review?
· The final 1003 form or application and the form 1008 transmittal.
· It's funny, but almost every file we see at NLS is absent the final 1003 application and the form 1008 transmittal.
Why is it funny to you?
· A RESPA Audit cannot be of value if the 1003 is wrong and the 1008 is incorrect. If both are wrong you cannot audit any other disclosure documents where they all are wrong. So what are you auditing?
Really? Why is that?
· The 1008 is the lead disclosure document and the 1003 is a federal document that prohibits any type of fraud. Every document we see from a borrower is from the signing of the loan. Those loan docs are considered final documents. But the final 1003 application and 1008 transmittal are the most important documents to an underwriter or examiner. Yet, they are always missing from the borrower's loan file.
What is the significance for these documents?
· First, a lender will argue equitable distribution of consideration and mutual consent at the time of funding. Both parties signed the documents and both received ample consideration under a fraudulent set of terms and conditions.
· Second, the fraud many refer to at signing actually takes place behind the scene long after the loan is signed.
I understand but still, what is the real significance of the two items you claim I am missing?
· You did sign the loan documents and you are the maker of the note. The motivation to sign the documents was in exchange for the funds used to purchase or refinance the home you’re in.
And your point?
· The final 1003 may be different than the one you’re presented at closing. And the 1008 is a carefully crafted documented used solely to sell loans into the secondary market. In other words, the final 1003 and 1008 must sing out their song in perfect harmony to allow a loan to be sold later.
So, if the presumption of equitable distribution is true....what’s the difference?
· It's not necessarily true, that is the rule of equitable distribution. But a lazy lawyer and clueless judge will opt for the arguments and use the rule to fast-forward a decision for their fair haired client or victim defendant, the lender.
· You must differentiate the fraud from consensual error’s and mutual culpability Try to further evidence the efforts by the lender to perpetrate fraud that are far beyond closing and long after your endorsement of the loan documents and settlement!
Okay, got it. What’s next?
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