Contributed by Rob Harrington
co-founder, LoanChex, Inc.

I basically got into the loan audit business as a means to save my properties. As a small-fish RE investor, I was able to retire in 2005, only to wake up in 2007 and find I was possibly going to lose everything. I started the same way many of you are starting–by researching the fraud in my own two WAMU loans. My Florida nightmare had begun.

A few weeks ago, after 2 and 1/2 years of pure hell, fear, misery, frustration…. (sound familiar…?) opposing counsel and whoever purported to “own my loan” failed to show up to the hearing. The hearing was to show cause as to why the Judge’s direct order to compel discovery was not followed. That is a no-no with Judges. It shows disrespect to the Judge, the court, and to justice and fairness. And my case was dismissed… for now.

As co-founder of a Mortgage Fraud Examination firm, I have talked to many of the best auditors in the country. Here is what you should consider before you spend more money towards your legal defense of your home.

1. Only get a loan audit if you are under direct supervision of a qualified foreclosure defense attorney. Your counsel will better determine the scope of work of the audit. I urge new auditors to work ONLY under Attorney supervision and NEVER directly be paid by the homeowner. The rationale behind my humble opinion is that history repeats itself. The Attorney Generals will soon be coming after the auditors as they did the loan mod types for many good reasons. Many auditors will be coming over from the loan mod business now that they are getting shut down. This industry will become “infested.”
2. Don’t buy an audit directly from an auditing firm. You may fall into the same problem that many struggling homeowners did over the last few years when hiring a loan mod company. Loan audits are very time consuming. Audits need to be exact and precise, and direct counsel to which laws are effected by breaking down the loan origination, underwriting, appraisal, closing documents, disclosures, pooling and service agreements, escrow accounts, payment histories… and the list goes on and on, ad nauseum.
3. Beware of simple TILA/RESPA software audits. They can be easily manipulated and biased if data is not entered correctly. My partner Dave is a 15-year mortgage expert who can tear a loan apart backwards and forwards. He is emphatic that you need to find fraud and serious errors to build good pleadings, effective affirmative defenses, and viable counter-suits. Additionally, focus on securitization/ownership issues and fraudulent assignments. That’s the meaty stuff! A simple TILA/RESPA is only a small fraction of the audit process, as well, the full audit cannot be performed until after full discovery. Your attorney and auditor will work better with a collaborative approach to building your proper defense. In other words, there are far better ways to ensure better results in court. A nationally prominent examiner describes a basic TILA/RESPA audit as a “band-aid on an amputation.” Spending $300 – $499 on a TILA/RESPA audit (over the internet?) will only limit the strength of your case. Your investment may be a waste of money. When it comes to YOUR case, “why bring a knife to a gun fight?”
4. Hold your attorney accountable and responsible for the audit’s content. Great attorneys win more cases than bad attorneys. Your attorney should be the key to increasing the odds of your success. Otherwise, why are you paying them to take on a losing case that they knew you would never win?
5. And your biggest question? How much? A comprehensive audit will average around $1500 to $2500. Ouch! I humanely suggest that the audit process can evolve over a long period of time and best compliments and supplements your attorneys work as your case evolves. Discovery may take a year or longer (as it did in my personal foreclosure case.) If your case gets dismissed earlier than the discovery phase, then you would never have paid the entire cost anyways with a phased-in metered approach. Your attorney should always explain the process and expense to you. More and more attorneys are starting to create creative billing systems for homeowners in today’s market. They oftentimes will take foreclosure cases with small down payments and reasonable monthly fees. If you already have been forced to stop paying your mortgage, IT MIGHT BE CHEAPER TO LITIGATE ON A MONTHLY BASIS THAN TO PAY RENT, OR A MORTGAGE PAYMENT, ON THE SAME MONTHLY BASIS. Additionally, set a flat fee for scope of work to include all work through discovery obtainment and analysis. This “caps” your high end of your legal investment so that you are not taking some crazy ride in a taxi from hell. This also helps you budget your expenses. Drastic times demand creative solutions. Demand creative payment solutions from your attorney. If they won’t, someone else will. Their ranks are growing by the day to meet the demand.

In fairness to foreclosure defense attorneys, today’s litigation defense is not as cut and dry as any of us would like to see it. Yet, case law is being made almost daily. Judges and attorneys alike are starting to see that loans made in the last ten years are a lot different than in earlier banking history. Securitization, exotic loan products, insane underwriting practices, lack of regulatory oversight, criminality, and pure greed, creates a different slant to today’s legal issues.

This is why it is crucial to hire an attorney who has been specially-trained in foreclosure defense [Editor's Note: You can find such attorneys through our site, IamFacingForeclosure.com]. This special rare breed should be an expert in contract law, real estate law, finance law and securities law, due to the overwhelmingly complex nature of this decade’s loans. Now you know WHY, in 2009, MILLIONS of (non-attorney) consumers are in foreclosure today!

By 2010, get ready for 3 more years of the exploding “Option Arms!” As lending insiders have famously stated, “Option Arms” are like neutron bombs…. kills the people but leaves the buildings standing.” Thanks guys!! See y’all in court!

So in the final analysis, hire the right attorney first–deal with the audit later!

Relax and keep the faith! I know of four foreclosure dismissals this last few weeks. The odds are tipping in your favor!

Rob Harrington
co-founder
LoanChex, Inc.
(850) 259-6422

PS – I am NOT an attorney. No information that I share should be construed as legal advice. Always consult with a qualified foreclosure defense attorney regarding your foreclosure. (I am only a ticked-off, entrepreneurial homeowner who stands for property rights, free speech, due process, justice, and fairness in the USA.)

An unprecedented federal lawsuit filed Tuesday by the city of Baltimore accuses mortgage giant Wells Fargo of engaging in predatory and discriminating loan practices. City officials estimate they could recoup “tens of millions” in damages.

Homeowners may get up to $5,000 to avoid foreclosure if the city of Baltimore prevails in the lawsuit filed yesterday against Wells Fargo.

Among other things, the city charges Wells Fargo with making black borrowers pay higher fees and interest rates on home loans and refinances.

Wells Fargo was the largest provider of loans in Baltimore between 2004 and 2007 and demonstrated the worst kind of racial disparity in regards to rates and volume of foreclosures, according to the lawsuit.

In 2006, Wells Fargo issued loans with an interest rate that was at least three percent above the federal benchmark to 65 percent of its black customers and to 15 percent of its white customers. The numbers show a clear unbalance.

Wells Fargo refuses to comment on ongoing litigation, but denied any wrongdoing in a recent statement.

“We do not tolerate illegal discrimination against or unfair treatment of any consumer,” Mr. Waetke said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly–our continued growth depends on it.”

This is not the first time accusations of racial discrimination and predatory lending have been made against a mortgage lender. Ameriquest was accused of predatory lending and settled a $295 million lawsuit with 49 states and the District of Columbia in 2006. Ameriquest customers are still receiving restitution checks.

In July of last year, the National Association for the Advancement of Colored People (NAACP) filed a lawsuit alleging the home loan industry discriminated by steering black borrowers into high-cost loans.

The Baltimore lawsuit is the first attempt by a municipality to recoup losses resulting from foreclosures, according to city officials. Mayor Sheila Dixon estimates the city could win “tens of millions” of dollars that could be funneled into counseling, refinance programs and other outreach efforts.

“Wells Fargo could do a lot, as well as other banks that have engaged in similar practices, to help to curb the flood of foreclosures that the city is experiencing now,” Suzanne Sangree, chief solicitor for the Baltimore City Law Department, said Tuesday during a press conference.

IamFacingforeclsoure.com will be chronicling stories of homeowners that are facing foreclosure in order to publicize the travesties that people are suffering as a result of toxic loans and predatory lenders.

If you would like your story published on this website, then please visit our sister website at www.LoanSafe.org  (Homeowners Forum) and register as a member to share your story with other homeowners and we will do our best to assist you in any way we can.

This is a letter from a man that Moe met 4 months ago. Mr. Don Bullis contacted Moe because he needed help to stop foreclosure on his home. After speaking with Donald, Moe realized that he was definitely the victim of predatory lending and needed an attorney right away.

His current mortgage was originated by a World Saving’s loan officer and that loan officer placed him in a negative amortization loan (commonly known as a Option ARM or Pick a Payment). That same loan officer inflated Donald’s income by over $4,000 and he is on a fixed income of only $2,500!

These are the kinds of abuses that we see everyday and these scams need to be publicized and the perpetrators brought to justice.

Moe called World Saving’s in behalf of  Donald Bullis and all they said was that Mr. Bullis signed the loan documents, so therefore they are not liable and will not do anything to assist him in helping him avoid foreclosure. 

To this day, we are still fighting with this lender, who admits no wrong doing.

Here is Donald’s letter to World Savings: 

The intent of this letter is to explain the position I find myself in, how I got there and what I could do to eliminate the problem.

I have a home loan with World Savings for $338,000, I am three payments due and ready to go into foreclosure. I am 67 years of age and on social security and my wife is on disability. Total income is $2300 per month. About a year ago I did a refinance through a loan officer who was not doing me or World Savings any favor.

This loan was a ARM fixed for five years with a pre pay penalty I paid $3,000 to reduce the penalty to only one year I was lead to believe that the payment would be $1380 including tax and insurance, this would be a pick a payment plan which means that if money was tight I could pay a lesser amount, I had sticker shock when I received the payment coupon from World Savings the $1380 was the minimum payment.

Nothing was explained to me about how the minimum payment worked, the loan balance goes up because the minimum  payment does not include interest which is added on. The broker told World Savings that my monthly income was $7,000 per month, how he could verify that is beyond me.

I should never have qualified for this loan. I believed the broker and never did my math if I had I would have known something was not right but I never. We topped out our credit cards which was a bad idea. I had hopes of finding employment but had no luck what so ever.

To resolve this problem I check into refinancing but due to my income and a late payment nothing could be done. I am now checking into Government grants to see if there is anything I can qualify for, but that is very time consuming and I don’t really know where to start any suggestions would be greatly appreciated If and when my plan is to get current with World Savings and the next step would be to start with the credit card with the less amount and start paying it off as soon as possible and keep the others current, the next step would be to use the payment from the paid off credit card and add that amount to plus the payment to the next credit card until they are paid off.

If I can find employment and not have the credit cards showing that they are over 50% of limit which has bad effects on my credit score I might look into refinancing to a fixed rate loan.

That is my story sad but true.

Donald Bullis

IamFacingForeclosure.com will do whatever we can to assist homeowners that are victims of predatory lending and help them stop foreclosure. Please let your story be heard and do not lose hope or your home without a fight!