Today we continue our guided tour through National Loan Auditor’s Forensic Loan Audit Pro.
Transactional Details/Participants
This section is a technical section. This section contains the data pertaining to the parties involved in the loan, and the actual property that acted as security for the loan. This section is more of a book keeping section to ensure that the parties involved can be identified and contacted, as well as to make sure that certain minimum requirements are met when analyzing a loan.
Mortgage Loan Audit Section
This section contains the actual audit. The rest of the Forensic Loan Audit interprets and summarized the data that is compiled in this section.
The audit starts with a checklist of the different questions asked by the auditors. Each question pertains to a specific requirement by a federal, state, or local law. These questions are very short and very pointed. This is similar to the way the questions would be presented in court, directed questions focusing on obtaining one piece of information in a very methodical format. Combined each of these small questions is used to determine if a violation has occurred in the loan.
Following the checklist is another checklist that lists any documents that were missing from the file. This is important because missing documents can effect the outcome of the audit in both a positive and negative way. The audit is only as accurate as the documents that the auditors have in the file.
Next is the Mortgage Loan Compliance Audit section which includes the Analysis Report from our automated system, which primarily tests for HOEPA (High Cost Loans) violations and TILA violations with regard to the Final Truth-in-Lending Statement and the Right of Rescission requirement, when applicable. It is important to note that while the Final Truth-in-Lending Statement can pass the tests, there still could be violations of the Truth in Lending Act (TILA), such as the Initial ARM Disclosure not being given to the borrower as required by TILA.
The Analysis Report in the Mortgage Loan Compliance Audit part is divided into three main sections. The first is the Findings Summary section which provides an overview of the tests that either passed or failed. It is important to note that any tests on this report which has the result of ‘not tested’ is due to the fact that the loan file did not contain the necessary document or data to perform these tests.
Below the Findings Summary section is the Findings Detail section. The format of this section is identical to the Findings Summary section, but it also provides a detailed explanation of why each test passed or failed.
The third section is the Loan Detail section, which displays the actual data entered into the automated system from the documents in the loan file submitted for audit.
When reading this Analysis Report it is important to understand the three columns of data, titled Loan Data, Comparison Data, and Variance.
With regard to the TILA test of the Final Truth-in-Lending Statement, the Loan Data column represents the actual data from the loan file, specifically from the Final TIL and HUD-1 Statement. The Comparison Data column shows what the APR and Finance Charges should have been based on the fees entered from the HUD-1 and more importantly from the specific terms of the loan as documented in the Note, Mortgage and the Riders. The Variance column simply shows the differences between the Loan Data or actual data from the loan file and the Comparison Data or correct data.
With regard to the HOEPA (High Cost Loan) test, the Loan Data column shows the correct APR and Points and Fees for this loan as determined by this analysis. The Comparison Data column shows the maximum allowable limits or thresholds allowed for this specific loan type, with regard to the APR and Points & Fees, as allowed under Federal Law, State Law and sometimes Local Law. If the actual APR and or Points and fees in the Loan Data column exceeds the threshold limits as displayed in the Comparison Data column, then the system fails the test as the loan is a high cost loan. The Variance column simply shows the differences between the Loan Data and the Comparison Data columns.
Summary of Applicable Laws
This section contains excerpts from the primary statutes that are used in the audit process. These statutes include the Truth in Lending Act, Home Owners Equity Protection Act, and the Real Estate Settlement Procedure Act. In addition this section includes summaries of applicable state and local laws. These are not the full statute but only the parts specifically referenced by the audit. The full statutes can be found at the Law Portal.
Supported Legislation and Investor Criteria
This is a list of all the different statutes that the audit checks against.
Alternative Causes of Action
This final section provides alternative causes of actions that can be used to bolster your claim against the lender, or to seek as an alternative cause of action if no violations were found in your audit. These causes of action are based in tort, contracts and other areas of common law rather than statutes.
As are all the legal causes of actions in our audit, these alternative causes of actions are supported by case law.
