NJ Forensic Analysis Sample

Forensic Analysis
Prepared For
Egg Harbor Town Ship, NJ 08234
This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011
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The loan transaction for the above-referenced borrower/property has been audited for violations of Truth in Lending Act [16 U.S.C. 1601] (TILA), Home Ownership Equity Protection Act [12 C.F.R. 226.32 et seq.] (HOEPA), the Real Estate Settlement Procedures Act [12 U.S.C. 2601], and to the extent applicable, violations of other state and federal laws discussed below. This report was based exclusively on the documentation provided. It also required that we make reasonable assumptions respecting disclosures and certain loan terms that, if erroneous, may result in material differences between our findings and the loan's actual compliance with applicable regulatory requirements. While we believe that our assumptions provide a reasonable basis for the review results, we make no representations or warranties respecting the appropriateness of our assumptions, the completeness of the information considered, or the accuracy of the findings. The contents of this report are being provided with the understanding that we are not providing legal advice, nor do we have any relationship, contractual or otherwise, with anyone other than the recipient. We do not, in providing this report, accept or assume responsibility for any other purpose. We strongly recommend you retain a licensed attorney, who practices in the county in which your property is located. The advise of the attorney supersedes any information you receive through this report. Livinglies/Luminaq
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Borrower: Subject Property: Egg Harbor Town Ship, NJ 08234 Origination Lender: Countrywide Bank, FSB 1800 Tapo Canyon Road Simi Valley, CA 93063 Origination Loan #: MIN #: Loan Amount: $288,000.00 Application Date: 04/09/2007 Closing Date: 05/09/2007 Funding Date: 05/14/2007 Sales Price: NA = refinance Appraised Value: Unknown = missing appraisal Value is $322,000 on Zillow 04/01/07 Seller: N/A = refinance Mortgage Broker: Not Same as lender Payless Mortgage Crop Interviewer: Antonio Izzo Appraiser: Omni Appraisal Closing Agent: Foundation Title LLC Metuchen 441 Main Street Metuchen, NJ 08840 Escrow Officer: Unknown Escrow Number: Title Insurance: Foundation Title LLC (per HUD) Cash Out Proceeds: Cash to borrower $11,334.53 Loan Summary: 78.95%LTV/CLTV refinance Primary residence, Single family home
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This analysis is based on the following information, which has been entered by us based upon the information supplied by the homeowner or homeowners council. THIS DOCUMENT MAY FALL UNDER ATTORNEY WORK PRODUCT PRIVILEDGE AND THEREFORE SHOULD NOT BE SHOWN TO ANYONE WITHOUT CONSULTING WITH YOUR ATTORNEY. This loan may have been paid in full by third parties as insurance guarantee, bail out or credit enhancements. In all probability the originator of the loan has been paid in full for their services. Therefore many attorneys are alleging as their primary defense :"Payment in Full".
Summary of Findings: This is not a legal opinion. Below is a summary of our findings. Based upon advise from our council in various States, these findings correspond to a probable finding of violation of law which should be confirmed with a licensed attorney.
1. 2. 3. 4. 5. 6. 7. 8. 9.
Underwriting Violation: Excessive DTI Ratios. PG Underwriting Violation: Unreasonable stated income. PG Underwriting Violation: Predatory Lending Practices. PG Compliance Violations: Missing Documents. PG Compliance Violations: Missing Underwriting Documents. PG Federal TILA violation: This loan failed the TILA finance charge test. PG 2 & Federal RESPA violation: This loan failed the Good Faith Estimate disclosure date test. PG 2 & Dates signed for initial documents do not comply with Federal RESPA CITE : 24CRF3500.17 NJ Home Ownership Security Act as Amended 2004 (NJ SB 279): The loan is a home loan, as defined in the legislation. PG 2 & Agreements). This indicates the below mentioned loan as being securitized. Further detail of this would be exposed through an audit of the trustee and servicing pool. There are perhaps hundreds of derivative investor owners of shares underlying the above referenced trusts, which the undersigned is still in the process of discovery. This could take considerably more time to complete however; the above institutions, and each of them separately, are claiming ownership through various interlaced loan servicing, trustee and management agreements which provide them both assets and cash flow underlying the issuance of their respective securities. See Page
10. This loan is serviced through MERS, which is contiguous with PSA (Pooling Service
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Based upon advise of council the above apparent violations give rise to numerous causes of action for compensatory damages, punitive damages and equitable relief. The borrower may have a right to rescind.
Examiner Notes for File: Credit scores: = Not Available Primary Residence single family dwelling Appraised value = $380,000; LTV = 78.95% Ratios Front End = 26.71% Back End = 39.40% Zillow reports current value is $224,500 with a gain of $2,000 in the past month. Earliest value was $172,000 on 07/01/2001. Highest value was $348,000 on 06/01/2006. Lowest value was $172,000 on 07/01/2001. Loan Application shows borrowers purchased subject property in 2001 for $250,000. Stated value was $380,000 on loan application.
Questionnaire information from borrower: Attorney: NA Attorney Name : 05-09-2007 Purchase or Refinance: Purchase Broker: yes, don't remember the none Reason For Loan: yes , all of the above Initial information about loan: the broker told me about the loan Who filled out application: Me Application was filled accurately: Yes Loan Terms Same as applied for: Yes Debt: yes Used to pay off other debt: Yes Fixed Income: Yes Where was the closing: at my home
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Who attended closing: me ,my wife and the agent Loan Explanation: they gave me a little info but they also said just sign and initial here Who chose closing agent: i don't know When received closing documents: at closing Not canceling document signed: NotSure Incomplete or blank document signed: NotSure Received Incomplete Notice to Cancel: Yes Notice to Cancel Explained: Yes Documents Notarized: No Terms of Loan changed: No Appraisal done: Yes Have copy of appraisal: No Loan for more than property value: Yes Payouts done properly: Yes High closing cost: Yes Told about closing charges: i don't remember Explained how broker will be compensated: No Extra money to broker paid: Yes Extra money to broker paid explanation: im not sure if the lender pay more money to the broker Problem with posting monthly payments: No Payments applied to suspended account: Do not know Late charges incorrectly posted: No Extra Charges posted: Yes Extra charges: im not sure Insurance forced: No Had valid insurance: Yes Principal going down: Yes Payments credited correctly: Yes Mortgage Company: country wide Mortgage Servicer: BAC Not properly Serviced: I DO COMPUTER TRANSACTIONS Treated unfairly: Yes Why Treated unfairly: They have with held information on what they did with my note and the securitization of MBS Excessed Rate: NotSure Prepayment Penalty: NotSure Refinanced this loan: 1 Refinanced with the same lender: No Payment increased after refinance: Yes Refinanced from fixed rate: Yes
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Forensic Examination Assumption: The application has no borrower's signature and no signature date. The application date is one of the Compliance Analyzer system required data fields. Therefore, we have made an assumption that the application date is 04/09/2007 (Assuming 30 days before the date of the Note of 05/09/2007). The closing/settlement date in the Compliance Analyzer (CA) system web form is the loan document signing date; therefore, we have made an assumption that the document signing date is the same as Escrow Officer's signature date on the Final HUD-1 with a settlement date of 05/09/2007 and a disbursement date of 05/14/2007.
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APPARENT UNDERWRITING VIOLATION - EXCESSIVE DTI RATIO Subject loan appears to have been underwritten as Stated Income Stated Assets (SISA) by origination lender. The borrowers primary occupation, as stated on the application, is Teacher for 10 years 01 month earning $6293.48 monthly. He has been a Teacher for 20 years total. The co-borrowers primary occupation, as stated on the application, is Accountant for 02 months earning $2950,00 monthly. She has been a Accountant for 10 years total. No underwriting Transmittal 1008 in file to determine what ratios were used to qualify. Income calculation per 2005 & 2006 W2s Calvin 2005 & 2006 Jeanette 2005 & 2006 Total income : ($72,868.93 + $71,991.36)/12 = $6,034.59 : ($38,185.55 + $39,994.84)/12 = $3,257.51 : $9,292.10
$1,867.90 P+I $77.00 hazard insurance per HUD $437.00 real estate taxes per HUD $100.00 $2,481.90 PITI divided by $9,292.10 useable verified income = 26.71% housing ratio $2,481.90 PITI + $1179.00 consumer debt on loan application $4810.18 / $9,292.10 = 39.40% total debt burden ratio This ratio is above the 28/36 ratio guidelines. In the above scenario, the borrowers DTI ratio far exceeds the maximum allowed DTI ratio per all usual and customary underwriting guidelines for ALT-A and/or Subprime lending. The lenders underwriter has a responsibility to not only follow the lenders underwriting guidelines but to insure that a thorough analysis of the borrowers income, liabilities and credit report is performed to determine the borrowers ability to repay the loan. We can determine that the Debt to Income Ratio for this loan was approximately 39.40%, which is well above the traditional debt ratio of 36%. This ratio, which is computed by dividing the borrowers gross monthly income into the borrowers total debt payments, including the proposed mortgage that is being underwritten, is a key factor used by underwriters to assess the borrowers ability to repay the debt. It is our opinion that an argument could be made, that the lender should not have made this loan and put the borrower in a position where there was a high probability of failure.
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From the documentation provided in the file, it appears that this loan might have been processed as a stated income loan. The underwriter has apparently approved this loan based upon credit score and a belief that the property would continue to increase in value. No consideration of the ability of the borrower to repay this loan with a realistic means test appears to have been made.
APPARENT UNDERWRITING VIOLATION: UNREASONABLE STATED INCOME Auditor is of the opinion the Stated Income reflected on loan application (1003) in file is overstated and misrepresents borrowers actual income. The 1003 reflects Stated Income of $9243.48.00 per month. Origination underwriter violated his/her fiduciary responsibility to origination lender and the investors/subsequent purchasers of this Note and underlying security instrument. The underwriter has primary responsibility to assess the borrowers ability to repay the proposed mortgage debt and determine whether Stated Income on 1003 is reasonable for the job description, employment history, assets and credit profile presented by the borrower through information on the 1003.
The lenders underwriter failed to follow generally accepted underwriting practices by qualifying the borrowers based on the stated income without determining the reasonableness of the income.
APPARENT UNDERWRITING VIOLATION: PREDATORY LENDING PRACTICES Practices widely identified as predatory include:
fraudulent practices that conceal the facts of the borrower's obligation and/or income; steering a borrower to a high-cost loan when they could qualify for a lower-cost loan; making a loan that the borrower cannot afford to repay; making a loan to a borrower that provides no actual benefit for the borrower; flipping loans by inducing repeated refinancing, without benefit to the borrower, in order to generate fees.
The lender processed and approved this loan under a Stated Income program that requires employment verification but does not require income verification. However, the lender has a responsibility to determine the reasonableness of the stated income. The lenders underwriter failed to follow generally accepted underwriting practices by qualifying the borrowers based on the stated income without determining the reasonableness of the income. Had the underwriter investigated the borrowers occupations on web sites such as salary.com, indeed.com or payscale.com it could have been determined that the borrowers stated income was overstated.
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GOOD FAITH ESTIMATE AND TRUTH IN LENDING STATEMENT The Truth in Lending Act requires initial disclosures to be issued within three (3) business days of receipt of loan application or within three (3) business days of any changes to the terms of loan or program. File reviewed by Auditor did not include an Initial Good Faith Estimate (GFE) or an Initial TIL. Therefore the Initial Good Faith Estimate (GFE) and Initial TIL were apparently not provided within the 3 business days required by The Truth in Lending Act. Good Faith Estimate The Good Faith Estimate Disclosure was not in the file and the Initial Application was not signed or dated by the borrower(s) or loan officer. Lenders are required to provide borrowers with a Good Faith Estimate with in three business days of Initial Application and the estimated fees included on the GFE must be a reasonable estimate of the actual fees charged to the borrower per the HUD-1 Settlement Statement. The Real Estate Settlement Practices Act of 1974 (RESPA) represents a response by Congress to perceived abuses in the real estate settlement process and an attempt to protect consumers from unnecessarily high settlement charges resulting from those abuses. The stated purpose of RESPA was to bring about certain changes in the settlement process for residential real estate that would result in; ! more effective advance disclosure of settlement costs to home buyers and sellers; ! elimination of kickbacks or referral fees that had the tendency to increase unnecessarily the costs of certain settlement services; ! reduction in the amounts that home buyers were required to place in escrow accounts established to insure the payment of real estate taxes and insurance; ! and significant reform and modernization of local record keeping of land title information. 12 U.S.C.A. 2601. The Real Estate Settlement Practices Act of 1974 applies to any "federally related mortgage loan," that is, a loan other than temporary financing such as a construction loan that is secured by a first or subordinate lien on residential property, including individual units of condominiums and cooperatives. 12 U.S.C.A. 2602(1)(A). It also applies to loans made in whole or in part by any lender with deposits or accounts that are insured by a federal agency or a lender that is regulated by the federal government. 12 U.S.C.A. 2602(1)(B)(i).
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APPARENT VIOLATIONS: MISSING DOCUMENTS As noted below, this file did not include various initial disclosures that are mandated under both State and Federal laws. If a broker does not deliver the initial disclosures to the borrower, it becomes incumbent for the lender to ensure that these disclosures were delivered to the borrower. If the borrower was not provided with these disclosures within three business days from the date of the original loan application, the borrower will need to complete a sworn statement testifying to that effect. Initial TIL & GFE missing.
APPARENT VIOLATIONS: MISSING DOCUMENTS File is missing MOST initial disclosure documents and MOST final disclosures, including but not limited to:
Form 4506-T
Per RESPA (Real Estate Settlement Procedures Act 12 USC 2601 et seq.) Good Faith Estimate Affiliated Business Arrangement Disclosure Servicing Disclosure Statement Escrow Account Disclosure Per ECOA (Equal Credit Opportunity Act Reg B 12 CFR 202): Initial signed & dated Uniform Residential Loan Application (1003)
Per FCRA (Fair Credit Reporting Act 15 USC 1681): Disclosure of Credit Scores Notice to Home Loan Applicant
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OTHER CONSIDERATIONS
Duty of Lender and Broker The duty of the broker is to deal with the consumer in good faith. If the broker knew or should have known that the borrower will or had a likelihood of defaulting on this loan they have a fiduciary duty to the borrower to NOT place them in that loan (in harms way). Ordinarily it would be self evident that a banker or broker would not desire to put a borrower in a loan that is likely to fail, however in most instances over the last 10 years it appears that the party originating the loan had no risk of loss and therefore remained neutral as to whether the loan viable or not. The fact that the loan originator was neutral should have been disclosed to borrower. This is required under TIL disclosures. Additionally broker has a contractual duty of good faith and fair dealings with the lender which would be breached if they knowingly placed a loan with the lender failing to disclose the material fact that the borrower will likely default or file bankruptcy. The duty of the lender is a responsibility to perform their own diligence to determine if a customer is being placed in a loan that is legal, properly disclosed, is the best loan for the consumer given their financial circumstance and affordable over the life of the loan if present financial positions hold steady. If the lender is aware that the borrower would be better off with another type of loan that the lender offers, they have violated their duty to the consumer and such act of deception would likely be considered fraud on the consumer and a predatory lending practice.
It is the opinion of the examiner that the lender may have violated their duty to the borrower by: 1. Placing the borrowers into their current loan product without regard for other products that might have suited the borrower(s) better, 2. Placing the borrower(s) into a loan whereby it was likely the borrowers would default or incur bankruptcy as a result of the loan and it was reasonably foreseeable that such would occur, 3. Placing borrower(s) into a loan product that clearly was not viable as a result of the lenders apparent failure to verify employment or income. 4. Placing the borrower(s) into a loan product without verifying the real estate appraisal. In many cases apparently this case included, the appraiser was utterly given instructions by lender or lenders representative to be shown as fair market value, which is based on the lenders desired
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transaction, rather than fair market value. This is one of the abuses referred to above that results from table funded loans in which the originator has no risk of loss.
Supporting Case Law -This is not a complete list. Am. Bankers Ins. Co. v. Wells, 819 So. 2d 1196 (Miss. 2001) Barrett v. Bank of Am. 229 Cal. Rptr. 16 (Ct. App. 1986) Charleswell v. Chase Manhattan Bank, N.A., 308 F. Supp. 2d 545 D. V.I. 2004) Chedick v. Nash, 151 F. 3d 1077 (D.C. Cir. 1998)Hilgeman v. Am. Mortg. Securities, Inc., 994 P. 2d 1030 (2000) Choi v. Chase Manhatten Mortg. Co., 63 F. Supp. 2d 874 (N.D. Ill. 1999) Citicorp. Mortg. Inc., v. Upton, 42 Conn. Supp. 302 (Conn. Super. 1992) Farm Credit Servs. Of America v. Dougan, 2005 S.D. 94 (2005) Foley v. Interactive Data Corp., 765 P.2d 373 (Cal. 1988) In re Hart, 246 B.R. 709 (Bankr. D. Mass. 2000) Whittingham v. Mortg. Elec. Registration Servs., 2007 WL 1362669 (D.N.J. May 4, 2007)
Also, please see the Alternative Causes of Action at the end of this report. Additional or missing documents may be provided with in 14 days of receipt of this audit report and the audit report will be updated and sent that reflects any changes.
We have researched the subject of TILA violation from the lender to the borrower
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on stated loans to the best of our ability. If there is any further related case law or other support that you can share with us, please feel free to let us know and we will incorporate it. We are continually striving to bring the best and most up to date audit to our customers. Stated Loans and Lending Misconduct The borrower has a right to rely on the superior knowledge & expertise of the broker & originating lender. Typically the borrower reasonably relied on the expertise and the superior knowledge The broker would then tell the or the broker, the combined representation that the fair market value exceeded the proposed loan balance together with the representation that the loan will be refinanced providing the borrower with a buffer was entirely untrue. In terms of our forensic loan audits, we look at the borrowers actual W-2 and tax returns to determine their true debt to income (DTI) ratio at the time the loan was originated. We then compare that figure to what the stated income was put on the actual loan application. If the two numbers do not match up the attorneys frequently bring the following causes of action against the lender. Based upon our discussions with council in various states the following paragraphs would appear to apply in most instances. Laymen are advised to seek council before deciding to take any action. Breach of Fiduciary Duty Traditionally, a credit transaction has been considered an arms length transaction in which there has been no special duty read into the creditor-debtor relationship. Most courts, however, have held that the presence of certain factors in the creditor-debtor relationship may give rise to a fiduciary duty. For example, a fiduciary relationship can arise when a party, generally a weaker party in the sense of the ability to protect itself, places trust and confidence in another. Such a duty of confidence arguably can arise if a lender acts in the role of advisor and knows or should have known the borrower trusted him. When such a relationship exists it creates a duty to disclose. This duty of confidence arises in most creditor lender relationships, but it occurs exponentially more in situations where the loan is a stated loan. The borrower is the weaker party in the transaction due to their inability to negotiate many of the primary terms of the loan. The loan is being offered to the borrower in a take-it-or-leave-it fashion where they have no ability to negotiate major terms such as APR or payment schedule. Also in terms of legal strength the lender will have an entire legal department at their disposal, where some borrowers will not even be able to afford an attorney. Due to these disparities in negotiating power, the borrower puts their trust in the lender to
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advise them as to the best course of action. This creates a fiduciary relationship which requires the lender to disclose all material information. If established, the existence of a duciary duty gives rise to a duty of fair and honest disclosure of all facts which might be presumed to inuence the consumer to act. Barrett v. Bank of Am. 229 Cal. Rptr. 16 (Ct. App. 1986). The lender must adhere to their duty to be fair and honest in their disclosures of all facts which might be presumed to influence the borrowers decision to accept the loan. In most cases the lender will be using the stated loan to get the borrower into a loan that they otherwise could not afford. The lender knows the reason the borrower could not qualify for the needed loan based on their actual income is because there is a high probability that they will default on the loan. Thus the borrower cannot afford the loan without the lenders help in fudging the numbers. The lender has disclosed the fact that he is fudging the number to enable the borrowers to get into the home they want, however what he does not disclose is the fact that there is an extreme likelihood that the borrower will default on the loan. Thus the lender has breached their fiduciary duty to disclose those facts that would presumably influence the borrower. When there is a duty to disclose, failure to do so should give rise to a tort cause of action for nondisclosure, or the silence may be deemed a misrepresentation. Such claims can be used to invalidate the underlying mortgage transaction or to recover money damages to offset any delinquency. Unconscionability The common law contract defense of unconscionability may be applicable, when either the mortgage terms are unreasonable favorable to the lender or certain aspects of the transaction render it unconscionable. In re Maxwell, 281 B.R. 101 (Bankr. D. Mass. 2002); Hager v. American Gen. Fin. Inc., 37 F.Supp. 2d 778 (1999). For example, a Connecticut court found a second mortgage contract to be unconscionable based on the facts that: The defendants financial situation made it apparent she could not reasonably expect to repay the mortgage At the closing, the defendant was not represented by an attorney and was rushed by plaintiffs attorney to sign the loan document And there was an absence of meaningful choice on the part of the defendant. In addition, the court found that the contract was substantively unconscionable, because it contained a large balloon payment that the borrower had no means of paying, and that the borrower had no reasonable opportunity to understand the terms of the contract. Family Fin. Servc. V. Pencer, 677 A.2d 479, (Conn. Ct. App. 1996); Emigrant Mortg., Co., Inc., v. DAngostino, 896 A.2d 814 (Conn. App. Ct. 2006).
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If the broker knows that the borrowers financial situation is such that there is no reasonable way that they would ever be able to repay the loan, then the loan is unconscionable and invalid under contracts law. This is exactly what brokers were doing when they were making stated loans for borrowers, so that they could get into the house they want, rather than the house they could afford. Based upon our discussions with council in various states the following paragraphs would appear to apply in most instances. Laymen are advised to seek council before deciding to take any action. Fraudulent or Negligent Lending Another argument for borrowers to raise is that the bank acted negligently in creating the stated loan because it was a loan that invited abuses. The bank knew or should have known that stated loans would be abused by the brokers in order to obtain larger commissions and more numerous clients. If the bank actually knew or must have known of the defects in the underwriting process that were not disclosed to the borrower then the action becomes an intentional tort known as fraud in the inducement. Recent cases between institutions regarding these mortgages strongly indicate that the fact pattern in most of the referenced loans falls squarely within the elements for fraud in the inducement this is another way of saying that had they not been intentionally deceived they would have never entered into the transaction to begin with. The plaintiffs in these recent cases include insurers and counter parties to buy back or hedge provisions or instruments. Borrowers seeking to assert tort claims based in negligence have met with mixed results. Whether styled as a claim for negligence or negligent servicing, courts have applied the same traditional four part test. Hutchinson v. Delaware Sav. Bank F.S.B., 410 F. Supp.2d 374 (D.N.J. 2006). In order, for plaintiff to prevail in such an action, they must show: 1. a duty of care owed by the defendant to the plaintiff 2. breach of that duty by the defendant 3. injury to the plaintiff 4. the defendants breach caused the plaintiffs injury
The first hurdle for plaintiffs, and often times the hardest to overcome, in asserting a cause of action based in negligence is establishing a duty of care owed by the servicer to the homeowner. Typically the borrower lender relationship is not one where any duty is recognized. In addition, some courts have even stated that the borrower lender relationship is an adversarial one. Jack v. City of Wichita, 23 Kan.App.2d 606, 614, 933 P.2d 787 (1997). However, a duty can arise in some situations.
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Generally a breach of contract alone will not give rise to a duty of care. A contract can provide the basis for a tort claim only if a duty exists independently of the performance of the contract. Thus a negligence claim may be available when the law imposes some other duty of affirmative care. For example, a servicers violation of the duty imposed by RESPA to respond to qualified written request can provide the basis for a negligence claim. Rawlings v. Dovenmuehle Mortg. 64 F. Supp. 2d 1156, (M.D. Ala. 1999). One court has found a duty of care in servicing loans to maintain proper and accurate loan records and to discharge and fulfill the other incidents attendant to the maintenance, accounting and servicing of loan records. Islam v. Option One Mortgage Corp., 432 F. Supp. 2d 181 (D. Mass. 2006). More recently courts have begun to allow borrowers to bring claims of negligent lending, when the lender engages in a pattern of willful and negligent failure to perform even a rudimentary verification of the information submitted by borrowers. However these cases are still being resolved. Boykin v. CFS Enterprise, Inc., 2008 WL 4534400 (D.Kan.2008) A second significant challenge for homeowners is demonstrating that the servicers conduct was the proximate cause of their injuries. See Hutchinson. Proximate cause is the act that sets off a natural chain of events that produces the injury. However, an unforeseeable intervening cause may break the causal relationship. For example, at least one court has stated that numerous other negative credit items on the homeowners credit report, precluded a finding that the servicers incorrect reporting of her account status caused her to be denied later refinancing. The borrower will have to prove that they would not have been injured but for the lenders negligent lending practices, and that the harm the borrower incurred was foreseeable by the lender at the time the loan was made. The borrower has the difficult task of proving that had the lender put them into a loan they could have afforded then they would still have made all the payments and successfully paid off the loan. Negligent lending is a difficult claim to make by the borrower. Historically the courts have not been willing to allow claims of negligence against lenders. However in the wake of the recent lending industry collapse courts are beginning to allow these claims on a more frequent basis. A number of cases have been brought in the last 6 months that have yet to be resolved. The mere fact that borrowers are being allowed to bring these negligence cases to court shows that there is a willingness by judges to dig deeper into the lending practices of the banks to find violations. Based upon our discussions with council in various states the following paragraphs would appear to apply in most instances. Laymen are advised to seek council before deciding to take any action.
Enforcement of Lost or Destroyed Instruments
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The lending and real estate industry relies heavily upon paperwork and documentation. It is the nature of the industry to have stacks of paperwork and disclosures related to every loan and every piece of property. This is beneficial for everyone because in theory there is a record of every transaction that occurs and the specifics related to that transaction. However, the flip side to that is that when a document does go missing it creates quite a legal headache. One such piece of paperwork is the Deed of Trust or Mortgage. A Deed of Trust is the actual legal document that creates a financial interest in the title to real property, held by a trustee, who holds it as security for a loan. Without the Deed of Trust there is no record that the borrower or lender has any financial interest in the real property, or that there was any security for the loan. Attorneys have begun to request that lender produce the Deed of Trust in conjunction with litigation. The thinking is that if the lender cannot produce the note then the agreement between lender and borrower is invalid and cannot be enforced. This is only partially true. General law in the area of lost instruments is well settled for the most part. States vary in their exact wording and standard of proof, but overall the area of law is fairly static. The party seeking to recover upon a lost instrument, in most cases, is the lender since they are seeking to enforce the loan and exercise their right to foreclose. The lender then has the burden of proving the former existence, delivery, execution, theft or loss, and contents of the instrument. Thus, in proving up a lost or destroyed deed, the party seeking to do so carries a very high burden in setting forth the description of the property, the nature and extent of his or her interest therein, a description of his or her evidence of title, the date and contents of that evidence of title, and the name of person who executed the same. While some courts state that one seeking enforcement of a lost promissory note must by clear and convincing evidence establish ownership of the instrument, an explanation for absence or loss of the instrument, and the terms of the instrument, others require entitlement to payment under a lost promissory note be proved by only a preponderance of the evidence. It has also been said that the proof must be such as to leave no doubt, or no reasonable doubt. Further, it has been held that parole evidence should show by a preponderance of the evidence that a lost deed was properly executed with the formalities required by law; that proof must be more than a mere preponderance of the evidence; and, on the contrary, that proof that defendant executed a lost note need not be by a preponderance of the evidence. The lender who wishes to enforce the missing instrument must prove that it once existed in order to enforce it. If the lender cannot sufficiently prove the existence and terms of the missing instrument, then it is like the instrument did not exist. However, this is highly unlikely. In most cases the lender will be able to prove to the court through circumstantial evidence the terms, execution, delivery, and consideration after showing that proper but futile search has been made for deed where it would most likely be found. When a borrower or borrowers attorney is met with such a position, several defenses
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should be considered. These affirmative defenses may take the form of or be asserted along the following lines, provided they are asserted in good faith: 1. Upon information and belief, the mortgage note has been paid in whole or in part by one or more undisclosed third party(ies) who, prior to or contemporaneously with the closing on the loan, paid the originating lender in exchange for certain unrecorded rights to the revenues arising out of the loan documents.
2. Upon information and belief and in connection with the matters the subject of paragraph 1 above, Plaintiff (foreclosing party) has no financial interest in the note or mortgage. 3. Upon information and belief, the original note was destroyed or was transferred to a structured investment vehicle which may be located offshore, which also has no interest in the note or mortgage or revenue thereunder. 4. Upon information and belief, the revenue stream deriving from the note and mortgage was eviscerated upon one or more assignments of the note and mortgage to third parties and parsing of obligations as part of the securitization process, some of whom were joined as coobligors and co-obligees in connection with the closing. 5. To the extent that Plaintiff has been paid on the underlying obligation or has no legal interest therein or in the note or mortgage, or does not have lawful possession of the note or mortgage, Plaintiffs allegations of possession and capacity to institute foreclosure constitute a fraud upon the court. 6. Based upon one or more of the affirmative defenses set forth above, Defendant (borrowers name) is entitled to a release and satisfaction of the note and mortgage and dismissal of the foreclosure claim with prejudice. These argument may still be somewhat beneficial to the borrowers because if the deed of trust is not produced and circumstantial evidence is then used by the lender to prove the existence and terms of the Deed of Trust, then the borrower can also introduce their own circumstantial evidence as to terms. This could allow the borrower to focus on the terms that are most beneficial to them.
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CURRENT STRATEGIES 1. Verify the Violation

It is important to make sure that the attorney has an accurate file from the borrower and nothing is lost or being intentionally held back. A forensic loan audit from us will highlight any violations made in the origination of the loan. The first thing that should be done is that the violations should be verified. The forensic loan audit relies on the documents given to the auditors. This means that the auditors only have the documentation that has been given to them by the client when performing their audit. While we do our best to make sure all documents have been received from the clients, sometimes clients have lost documents. If a page was not provided, then it will not be consider as part of the audit. This could cause our auditors to find a violation when in reality the page is just missing. The attorney for the borrower should see what the lender has in their files to see if the lenders files and the borrowers file match. To do this the attorney should send a qualified written request to the lender upon signing a new client, notifying them of the violation and request any documentation they have relating to the loan to be sent back to the attorney. This will allow the attorney to verify that there was a violation. For example, if the audit finds a HOEPA violation because the loan was a high cost loan and no HOEPA disclosures were made, then the attorney should send the qualified written request to the lender to determine if the lender has any documentation that the HOEPA disclosures were in fact made.
2. Making it Cost Effective for the Lender to Give the Borrower a Loan Modification
During the negotiations for the workout agreement, the attorney needs to seriously evaluate the strength of the case. Some violations are more severe than others. For example, a TILA violation will allow the borrower to rescind the loan, however, a minor RESPA violation may only grant the borrower $2,000 to $3,000 in statutory damages. This is important because it will determine what type of modifications the attorney and the borrower (client) are willing to accept. The forensic loan audit will greatly assist you in this evaluation by alerting attorney and their borrower(s) (client) to the frequency and severity violations. Bottom line the attorney needs to show the lender that it will be more cost effective to give the borrower(s) a loan modification than to foreclose on the property or to fight it in court and risk the loan ultimately being rescinded. This should be approached by showing the lender all the costs that it will incur by holding onto the loan.
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Some of these considerations are;

the cost of foreclosure on the home when the borrower(s) ultimately defaults on the
loan,
carrying cost to maintain the home while the bank holds it awaiting auction
(marketing, taxes, insurance, repairs, security),

attorney fees to defend the cause of action should the case go to court, true overhead cost of the man hours the lender will dedicate to this case, lender or Bank required reserves that may have to be met, cost of defending against possible attack on foreclosure claim, cost of negative impact on other holdings in the surrounding area (if bank has loaned in a
concentrated area). Each foreclosure could result in an additional 4% drop in value on surrounding homes. If the borrower raises all the different costs associated with the lender holding onto the house and the lender is still unwilling to give the borrower a modification, then the attorney and the borrower(s) (client) can then bring a lawsuit, enforcing their rights. The most significant right that the borrower has is the right to rescind the transaction.
3. Bringing a Cause of Action to the Courts

Under TILA & Regulation Z, Recession means a declaration of any kind by the borrower of an intent to cancel the loan transaction. The effect of that declaration is to create an obligation on the part of the lender to either return the note as cancelled, file a satisfaction of reconveyance of the mortgage deed and return all monies paid by the borrower in connection with the purported loan transaction. In the alternative the lender may file a declaration of rights provided that they do so with in 20 days from the date of the declaration of canceling or rescinding the transaction. than what was initially borrowed. deleted text according to the statutes and Regulation Z the borrower has no obligation to tender any money to the lender unless the lender has complied with the fore-stated conditions proceeded. The tender by the borrower can be in any reasonable form including a payment schedule, where the principle balance is a net balance after deductions for statutory or common law damages. The right to rescission is powerful because it means that the borrower can tender the amount borrowed to the lender less any closing costs, fees, interest, payments made, or any other costs associated with the loan. This usually results in an amount much less than what was initially borrowed. Attorneys for the borrowers seem to agree that the burden of bringing the matter to court is on the lender and not the borrower.However lenders almost invariably ignore declarations of rescission, forcing borrower to bring lawsuits for breach of TILA and Regulation Z because the borrower issued a declaration of rescission and the lender failed to respond in any matter.
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The attorney has the option of enforcing Truth in Lending Act and other rescission rights in federal district, state, or bankruptcy court. Of course, the relative advantages and disadvantages of federal court, state court, and bankruptcy court vary from jurisdiction to jurisdiction. The attorney will want to choose the court that fits his/her specific situation best. For example, an attorney will not want to file in bankruptcy court unless he/she is planning on including a bankruptcy factor into the workout agreement in same way. Regardless of which court the attorney may choose to file in, the general approach will be the same. The attorney needs to present their case showing that the lender violated applicable lending regulations allowing the borrower to rescind the loan. The forensic loan audit can be used throughout the trial process to highlight and emphasize violations made in the originating loan documents. Also we provide access to expert witnesses who are able to interpret the audit and testify in court as to the validity and accuracy of the audit. If the attorney successfully brings a cause of action to the court, the attorney will be able to recover significant damages depending on the actual violation made in the loan. The ultimate remedy is rescission, for reasons stated above. Other damages can include actual damages, statutory damages, attorney fees, and in some cases punitive damages. Recently some courts have also begun to award loan modifications in cases that equity is required for the loan to be enforceable, such as HELOCs, and fixed rate Seconds.
Audit Detail
The following portion of the audit file checks the detail of the borrowers file against Federal, State & Local laws.
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MORTGAGE COMPLIANCE ANALYSIS REPORT

Lender Loan Number: Product Name: Report Type: Report Date/Time: Report Version: RiskIndicator ComplianceAnalyzer Post-Close Mortgage Loan 06/15/2011 11:51 AM (PDT) 4 HOEPA TILA RESPA Borrower Name: Property Address: Egg Harbor Township, NJ 08234 State & Local Predatory State Regs Exceptions Policies / Custom
FINDINGS SUMMARY
Federal HOEPA (Sections 32, 35) HOEPA Higher-Priced Mortgage Loan: HOEPA Higher-Priced Mortgage Loan Prepayment Term Test: HOEPA Higher-Priced Mortgage Loan Document Type Test: HOEPA Higher-Priced Mortgage Loan Required Escrow Account Test: HOEPA Higher-Priced Mortgage Loan Jumbo Required Escrow Account Test: HOEPA High Cost Mortgage APR Threshold Test: HOEPA High Cost Mortgage Points and Fees Threshold Test: HOEPA High Cost Mortgage: HOEPA High Cost Mortgage Timing of Disclosure Test: HOEPA High Cost Mortgage Balloon Payment Test: HOEPA High Cost Mortgage Negative Amortization Test: HOEPA High Cost Mortgage Prepayment Term Test: HOEPA High Cost Mortgage Document Type Test: Federal TILA TILA Finance Charge Test: TILA Rescission Finance Charge Test: TILA Foreclosure Rescission Finance Charge Test: TILA APR Test: TILA Right of Rescission Test: Initial TIL Disclosure Date Test: Federal RESPA RESPA GFE Disclosure Date Test: RESPA "Your Credit or Charge" (802) Disallowed Credit and Charge Test: Result FAIL NOT TESTED Loan Data Comparison Data Variance Result FAIL PASS NOT TESTED PASS PASS N/A Loan Data $386,927.74 $386,927.74 6.834% Comparison Data $387,315.74 $387,315.74 6.818% Variance -$388.00 -$388.00 0.016% Result N/A N/A N/A NOT TESTED NOT TESTED PASS PASS NO N/A N/A N/A N/A NOT TESTED 6.818% $1,889.00 12.690% $22,812.19 -5.872% -$20,923.19 Loan Data Comparison Data Variance
GSE (Based on Fannie Mae Lender Announcements and Lender Letters)
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GSE (Fannie Mae public guidelines) Predatory Lending Guidance: GSE (Fannie Mae public guidelines) Allowable Points and Fees Test: GSE (Fannie Mae public guidelines) HOEPA APR Test: GSE (Fannie Mae public guidelines) HOEPA Points and Fees Test: GSE (Fannie Mae public guidelines) Seller Paid Points and Fees Exception Test: GSE (Fannie Mae public guidelines) Prepayment Penalty Term Test: GSE (Fannie Mae public guidelines) Interest Only Mortgage Test: GSE (Fannie Mae public guidelines) Points and Fees Alert: GSE (Fannie Mae public guidelines) Alert: NJ Home Ownership Security Act of 2002 (NJ AB 75)
Result PASS PASS PASS PASS PASS PASS NOT TESTED ALERT ALERT
Loan Data
Comparison Data
Variance
$845.00 6.818% $1,889.00
$14,400.00 12.690% $22,812.19
-$13,555.00 -5.872% -$20,923.19
Result This loan is not covered by NJ Home Ownership Security NOT COVERED Act of 2002 (NJ AB 75). NJ Home Ownership Security Act as Amended 2004 (NJ SB 279) Result Home Loan: YES NJ HOSA 2004 Home Loan Financing of Insurance PASS Premiums Test: NJ HOSA 2004 Home Loan Late Charge Test: PASS NJ HOSA 2004 Home Loan Grace Period Test: PASS NJ HOSA 2004 High-Cost Home Loan APR Threshold PASS Test: NJ HOSA 2004 High-Cost Home Loan Points and Fees PASS Threshold Test: High-Cost Home Loan: NO NJ HOSA 2004 High-Cost Home Loan Balloon Payment N/A Test: NJ HOSA 2004 High-Cost Home Loan Potential Negative N/A Amortization Test: NJ HOSA 2004 High-Cost Home Loan Financing of N/A Points and Fees Test: NJ HOSA 2004 Legislative Summary Alert: ALERT NJ HOSA 2004 Home Loan Points and Fees Alert: ALERT NJ HOSA 2004 Home Loan Points and Fees, Seller-Paid ALERT Points and Fees Alert: NJ HOSA 2004 Home Loan Prohibited Practices ALERT Legislative Summary Alert: NJ HOSA 2004 Home Loan Prohibited Practices ALERT Legislative Summary Alert (Continued): NJ HOSA 2004 Liability Legislative Summary Alert: ALERT NJ HOSA 2004 Liability Legislative Summary Alert ALERT (Continued): NJ HOSA 2004 Liability Legislative Summary Alert ALERT (Continued): NJ HOSA 2004 Liability Legislative Summary Alert ALERT (Continued): State Regulations Tests pertaining to State Regulations were not performed. State Regulations Restricted Fees Result NOT PERFORMED
Loan Data
Comparison Data
Variance
Loan Data
Comparison Data
Variance
6.818% $10,529.00
12.690% $12,960.00
-5.872% -$2,431.00
Loan Data
Comparison Data
Variance
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Tests pertaining to State Regulations Restricted Fees were not performed. Threshold Index(es) Name H.15 Conventional Mortgage Rate (Annual) Treasury Security
Result NOT PERFORMED
Loan Data
Comparison Data
Variance
Term 30 Year
Yield 6.410% 4.690%
Date 01/01/2006 03/15/2007
TIL SUMMARY
Annual Percentage Rate 6.818% Interest Rate 6.750% Payment Schedule Number of Payments 359 1 Finance Charge $387,315.74 Amount Financed $285,152.32 Total of Payments $672,468.06
Amount of Payments $1,867.96 $1,870.42
FINDINGS DETAIL
Federal HOEPA (Sections 32, 35) The HOEPA higher-priced mortgage loan threshold is not applicable to this loan for one of the following reasons: ( 12 CFR 226.35(a)(3) as enacted in 2008 ) The loan has a date creditor received application (formerly application date) before the effective date of October 1, 2009; or The loan is a transaction to finance the initial construction of a dwelling; or The loan is a temporary or "bridge" loan with a term of 12 months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within 12 months. The HOEPA higher-priced mortgage loan prepayment term test is not applicable to this loan. ( 12 CFR 226.35(a)(3), (b)(2) as enacted in 2008 ) The loan is not a higher-priced mortgage loan. The HOEPA higher-priced mortgage loan document type test is not applicable to this loan. ( 12 CFR 226.35(a) as enacted in 2008 ) The loan is not a higher-priced mortgage loan. This loan is not tested against the HOEPA higher-priced mortgage loan required escrow account test due to one of the following reasons: The loan is a first lien with a date creditor received application (formerly application date) before the effective date for the escrow provisions of April 1, 2010; or The loan is a first lien with a date creditor received application (formerly application date) after the effective date for the escrow provisions of April 1, 2011, and the principal obligation at consummation exceeds the maximum principal obligation eligible for purchase by Freddie Mac; or The loan does not contain sufficient information to test the required escrow account test because this loan does not provide sufficient information on collected reserves; or The property type is a condominium or a high-rise condominium. Insurance premiums need not be included in escrow accounts for loans secured by condominium units, where the condominium association has an obligation to the condominium unit owners to maintain a master policy insuring condominium units; or The date the rate was set was not provided; or The loan is an adjustable rate mortgage and does not contain information on when the first rate adjustment will occur. If this loan contains sufficient information to test the required escrow account test, then ComplianceAnalyzer cannot determine whether this loan is subject to the higher-priced mortgage loan required escrow account provisions because the information needed to determine whether the loan is a HOEPA higher-priced mortgage loan, as defined in Regulation Z, is missing. This loan is not tested against the HOEPA higher-priced mortgage loan jumbo required escrow account test due to one of the following reasons: The loan is a first lien with a date creditor received application (formerly application date) after the effective date for the escrow provisions of April 1, 2011, and the principal obligation at consummation does not exceed the maximum principal obligation eligible for purchase by Freddie Mac; or The loan is a first lien with a date creditor received application (formerly application date) after the effective date for the escrow provisions of April 1, 2011, and the principal obligation at consummation exceeds the
N/A
N/A
N/A
NOT TESTED
NOT TESTED
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maximum principal obligation eligible for purchase by Freddie Mac, but the applicable APOR threshold has not been met; or The loan does not contain sufficient information to test the required escrow account test because this loan does not provide sufficient information on collected reserves; or The property type is a condominium or a high-rise condominium. Insurance premiums need not be included in escrow accounts for loans secured by condominium units, where the condominium association has an obligation to the condominium unit owners to maintain a master policy insuring condominium units; or The date the rate was set was not provided; or The loan is an adjustable rate mortgage and does not contain information on when the first rate adjustment will occur. If this loan contains sufficient information to test the required escrow account test, then ComplianceAnalyzer cannot determine whether this loan is subject to the higher-priced mortgage loan required escrow account provisions because the information needed to determine whether the loan is a HOEPA higher-priced mortgage loan, as defined in Regulation Z, is missing. This loan passed the HOEPA high cost mortgage APR threshold test. ( 12 CFR 226.32(a)(1)(i) as enacted in 1995, and amended in 2001 ) The annual percentage rate (APR) at consummation is 6.818%, which does not exceed the yield of 4.690%, as of March 15, 2007 on 30 year Treasury securities (the Treasury securities having comparable periods of maturity), plus 8.000 percentage points. The yield is as of the fifteenth day of the month immediately preceding the month of the application for extension of credit, which was received by the creditor on April 9, 2007. This loan passed the HOEPA high cost mortgage points and fees threshold test. ( 12 CFR 226.32(a)(1)(ii) as enacted in 1995, and amended in 2001 ) The total points and fees payable by the consumer at or before loan closing is $1,889.00, which does not exceed the greater of 8 percent of the "total loan amount" of $285,152.32 (as defined in the official commentary to paragraph 32(a)(1)(ii)), or $547.00. High Cost Mortgage ( 12 CFR 226.32(a)(1)(i), (ii) as enacted in 1995, and amended in 2001 ) ( 12 CFR 226.2 as enacted in 1995 ) The loan is not a high cost mortgage due to one of the following findings: The loan passed both the high cost mortgage APR threshold test and the high cost mortgage points and fees threshold test; or The loan is a residential mortgage transaction. The timing of disclosure test is not applicable to this loan due to one or more of the following findings: ( 12 CFR 226.31(c) as enacted in 1995 ) ( 12 CFR 226.32(a) as enacted in 1995 ) Pre-close audits do not pertain to the consummation of a loan. The loan is not a high cost mortgage. The balloon payment test is not applicable to this loan. ( 12 CFR 226.32(a) as enacted in 1995 ) The loan is not a high cost mortgage. The negative amortization test is not applicable to this loan. ( 12 CFR 226.32(a) as enacted in 1995 ) The loan is not a high cost mortgage. The prepayment term test is not applicable to this loan. ( 12 CFR 226.32(a) as enacted in 1995 ) The loan is not a high cost mortgage. This loan is not tested against the document type test. ( 12 CFR 226.32(e)(1) as enacted in 1995 , and 226.34(a)(4) as amended in 2001 , and 2008 ) The loan's application date is before the law's effective date of October 1, 2009. Federal TILA This loan failed the TILA finance charge test. (12 CFR 226.18(d)(1)) The finance charge is $387,315.74. The disclosed finance charge of $386,927.74 is not considered accurate because it is understated by more than $100. This loan passed the TILA rescission finance charge test. (12 CFR 226.23(g)(1)) The finance charge is $387,315.74. The disclosed finance charge of $386,927.74 is considered accurate for purposes of rescission because: It is understated by no more than 1/2 of 1 percent of the face amount of the note or $100, whichever is greater; or It is greater than the amount required to be disclosed. This loan was not tested against the TILA foreclosure rescission finance charge test due to one or more of the following findings: (12 CFR 226.23(h)) A disclosed finance charge was not provided; or Your company settings are not configured to run the TILA foreclosure rescission finance charge test as part of an audit report. This loan passed the TILA APR test due to one or more of the following findings: (12 CFR 226.22(a)(2),(4)) The disclosed annual percentage rate (APR) of 6.834% is considered accurate because it is not more than 1/8 of 1 percentage point above or below the APR of 6.818% as determined in accordance with the actuarial method; or
PASS
PASS
NO
N/A
N/A N/A N/A NOT TESTED
FAIL
PASS
NOT TESTED
PASS
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The disclosed APR results from the disclosed finance charge, and the disclosed finance charge is considered accurate under 226.18(d)(1) (the finance charge test), or for purposes of rescission the disclosed finance charge is considered accurate under 226.23(g) or (h) (the rescission finance charge test or the foreclosure rescission finance charge test), whichever applies. This loan passed the TILA right of rescission test. Closed-end (12 CFR 226.23(a)(3)) , Open-end (12 CFR 226.15(a)(3)) The funding date is not before the third business day following consummation. The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by 12 CFR 226.23 or 226.15, or delivery of all material disclosures, whichever occurs last. The initial TIL disclosure date test does not apply to this loan due to one of the following: Closed-end (12 CFR 226.17(b) , as amended in 2009) , Open-end (12 CFR 226.5b(1)) The date creditor received the application (formerly application date) is on or after July 30, 2009, and the loan is not a mortgage transaction subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) that is secured by the consumer's dwelling; or The application date of the loan is before July 30, 2009, and the loan is not a "residential mortgage transaction" subject to the Real Estate Settlement Procedures Act (RESPA). Federal RESPA This loan failed the Good Faith Estimate disclosure date test due to one of the following reasons: ( 24 CFR 3500.7 , as amended in 2008 ) The loan was audited under the "New Pre-Close or Post-Close Audit" selection from the ComplianceAnalyzer menu, and The loan has a Good Faith Estimate disclosure date that is not within three business days of the loan originator's application date (or the date creditor received application if loan originator's application date is not provided); or The Good Faith Estimate disclosure date is after the closing date. Or, the loan was audited under the "New Pre-Close or Post-Close Audit (Pre-2010 GFE/HUD-1)" selection from the ComplianceAnalyzer menu, and The loan has a Good Faith Estimate disclosure date that is not within three business days of the application date; or The Good Faith Estimate disclosure date is after the closing date. Not later than 3 business days after a loan originator (broker or lender) receives an application for a federally related mortgage loan, or information sufficient to complete an application, the loan originator must provide the applicant with a GFE. In the case of dealer loans, the lender must either provide the GFE or ensure that the dealer provides the GFE. The lender is responsible for ascertaining whether the GFE has been provided, if a mortgage broker is involved in the transaction. If the mortgage broker has provided a GFE, the lender is not required to provide an additional GFE. Calculations take into account a submitted preference that this test treat the creditor's office as not being open to the public on Saturdays for carrying on substantially all of its business functions, as described in 24 CFR 3500.2. The loan was not tested against the RESPA "Your Credit or Charge" (802) Disallowed Credit and Charge test. The loan was audited under the "New Pre-Close or Post-Close Audit (Pre-2010 GFE/HUD-1)" selection from the ComplianceAnalyzer menu. This test applies only to loans audited under the RESPA Final Rule published in the Federal Register on November 17, 2008. GSE (Based on Fannie Mae Lender Announcements and Lender Letters) This loan passed the predatory lending guidance test due to the following findings: The loan passed the allowable points and fees test. The loan does not exceed the HOEPA APR threshold for primary residences. The loan does not exceed the HOEPA points and fees threshold for primary residences. This loan passed the total points and fees test. (Fannie Mae Lender Letter Ann. 06-04) The total points and fees charged to the borrower do not exceed the greater of 5% of the mortgage amount or $1,000. This loan passed the GSE HOEPA APR test. (Fannie Mae Lender Letter Ann. 06-04) The APR does not exceed the GSE HOEPA APR threshold. This loan passed the GSE HOEPA points and fees test. (Fannie Mae Lender Letter Ann. 06-04) The points and fees as calculated under GSE HOEPA do not exceed the GSE HOEPA threshold. This loan passed the seller-paid points and fees exception test due to one or more of the following findings: The loan is not covered by GSE guidance. The loan is not a purchase loan. The loan is a purchase loan covered by GSE guidance and a value was provided for "Seller-Paid Points and Fees." This loan passed the prepayment penalty term test. (Fannie Mae 2006 Selling Guide, Part IV, 201.02)
PASS
N/A
FAIL
NOT TESTED
PASS
PASS
PASS PASS PASS
PASS
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The loan does not have a prepayment penalty with a term exceeding 3 years. This loan is not tested against the interest only mortgage test. (Fannie Mae Announcement SEL-2010-06) The loan was not tested against the interest only mortgage test for one or more of the following findings: The latest available closing date is before the effective date of June 19, 2010. The loan provides an interest-only feature and may not be eligible for purchase by Fannie Mae. GSE (Fannie Mae Public Guidelines) Points and Fees Alert Excludable Bona Fide Discount Points (Fannie Mae Lender Letter 04/11/2000) Points and fees do not include "bona fide discount points," a term that is undefined by the GSE. Checking the "Bona Fide - GSE" box next to the Loan Discount Fee on the loan data entry form will indicate that the discount points are bond fide. Check the box only if you know that your institution's policies for discount points meet the GSE's criteria and if they can be verified for the loan in question. Disclaimer This set of lending policies tests have been prepared in accordance with information and guidance made publicly available by the Government Sponsored Enterprises (GSEs). The results rendered do not constitute an actual approval or decision of any type on the part of any GSE with regard to the subject loan. The results are merely an opinion from our decision engine, representing one interpretation of the criteria provided by the GSEs. In the event that an approval or decision is sought from any GSE, the GSE will engage in its own separate decision-making process, and such process may produce a result that varies from the results set forth in these tests. NJ Home Ownership Security Act of 2002 (NJ AB 75) This loan is not covered by the New Jersey Home Ownership Security Act of 2002 due to one of the following findings: (NJ AB 75, 15.) , (NJ SB 279, 7.) The closing date of the loan (or application date, if the closing date is unknown) occurs before the effective date of November 27, 2003; or The closing date of the loan (or application date, if the closing date is unknown) occurs on or after July 6, 2004, which is the effective date of amendments to the Home Ownership Security Act. NJ Home Ownership Security Act as Amended 2004 (NJ SB 279) Home Loan (NJ AB 75, 3.) , (NJ SB 279, 2.) , (NJAC 3:30-1.3 "home loan", as proposed) , (NJAC 3:30-1.3 "home loan", final) The loan is a home loan, as defined in the legislation, due to the following findings: The mortgage is secured by a dwelling which is or will be occupied by a borrower as the borrower's principal dwelling; and The mortgage is not a construction loan, defined by regulations effective August 21, 2006 as a loan to a natural person having a term of two years or less, that is used to finance the construction of buildings or other structures and that does not automatically convert to permanent financing. This loan passed the home loan financing of insurance premiums test. (NJ AB 75, 4. a.) , (NJ SB 279, 3.) The home loan does not finance credit life, credit disability, credit accident, credit health, or credit unemployment insurance, or any payments for any debt cancellation or suspension agreement or contract. This loan passed the home loan late charge test. (NJ AB 75, 4. d.) , (NJ SB 279, 3.) The home loan charges a late payment fee not more than 5% of the amount of the payment past due. This loan passed the home loan grace period test. (NJ AB 75, 4. d.) , (NJ SB 279, 3.) The home loan charges a late payment fee assessed on a payment past due for 15 days or more. This loan passed the high-cost home loan APR threshold test. (NJ AB 75, 3.) , (NJ SB 279, 2.) The APR of the loan is such that the loan does not exceed an APR threshold of HOEPA (Section 32), without regard to whether the loan is covered by HOEPA. The APR at consummation is 6.818%, which does not exceed the yield of 4.690%, as of March 15, 2007 on 30 year Treasury securities (the Treasury securities having comparable periods of maturity), plus 8.000%. This loan passed the high-cost home loan points and fees threshold test due to all of the following findings: (NJ AB 75, 3.) , (NJ SB 279, 2.) The total points and fees for this loan are $10,529.00 and the total loan amount for this loan is $288,000.00. The total points and fees do not exceed 4.5% of the total loan amount if the total loan amount is $40,000 or more; and The total points and fees do not exceed 6% of the total loan amount if the total loan amount is $20,000 or more but less than $40,000; and The total points and fees do not exceed the lesser of 6% of the total loan amount or $1,000, if the total loan amount is less than $20,000. High-Cost Home Loan (NJ AB 75, 3.) , (NJ SB 279, 2.) The loan is not a high-cost home loan, as defined in the legislation, due to one or more of the following findings: The loan is not a home loan, as defined in the legislation; or The loan is a home loan and passes both the high-cost home loan APR and high-cost home loan points and fees threshold tests; or The loan is a home loan and the principal amount of the home loan exceeds $400,001.50. The high-cost home loan balloon payment test is not applicable to this loan. (NJ AB 75, 5. a.) The loan is not a high-cost home loan, as defined in the legislation.
NOT TESTED
ALERT
ALERT
NOT COVERED
YES
PASS
PASS PASS PASS
PASS
NO
N/A
Page 28
The high-cost home loan potential negative amortization test is not applicable to this loan. (NJ AB 75, 5. b.) The loan is not a high-cost home loan, as defined in the legislation. The high-cost home loan financing of points and fees test is not applicable to this loan. (NJ AB 75, 5. l.) The loan is not a high-cost home loan, as defined in the legislation. Attempts to Avoid the Act (NJ AB 75, 6. d.) , (NJ SB 279, 4.) , (NJAC 3:30-8.2 (e), as proposed) , (NJAC 3:30-8.2 (e), final) It is a violation of this act for any person, in bad faith, to attempt to avoid the application of this act by Dividing any loan transaction into separate parts; or Any other such subterfuge, with the intent of evading the provisions of this act. Excludable Discount Points (NJ AB 75, 3.) , (NJ SB 279, 2.) For the purposes of determining if a home loan is a high-cost home loan based on the points and fees thresholds, up to two bona fide discount points are excluded from the points and fees. If the "Loan Discount Fee" is designated as "bona fide," the discount points should be as described by the following definition: "Bona fide discount points" means loan discount points which are: Knowingly paid by the borrower; Paid for the express purpose of reducing, and which result in a reduction of, the interest rate applicable to the loan; In fact reduce the interest rate applicable to the loan from an interest rate which does not exceed the conventional mortgage rate (which rate is published by the Federal Reserve) for a first lien by more than 2 percentage points, or for a junior lien by more than 3.5 percentage points; and Recouped within the first five years of the scheduled loan payments. Loan discount points will be considered to be recouped within the first five years of the scheduled loan payments if the reduction in the interest rate that is achieved by the payment of the loan discount points reduces the interest charged on the scheduled payments such that the borrower's dollar amount of savings in interest over the first five years is equal to or exceeds the dollar amount of loan discount points paid by the borrower. Seller-Paid Points and Fees (NJ DBI Bulletin 04-22, Question 27) The Department of Banking and Insurance (DBI) issued a Q&A bulletin (number 04-22) on October 28, 2004. Question 27 of this bulletin states that costs paid by the seller that would be included in points and fees if they were paid by the borrower should be included when calculating the total points and fees threshold. This is based on a provision of the New Jersey Act that provides that it is a violation for any person in bad faith to attempt to avoid the application of the Act by any subterfuge. This guideline by the DBI has not been formally enacted as a regulation. Until such time as it becomes a regulation, there is some question of how reliable these guidelines would be if reviewed by the courts. Even so, to provide a suitably cautious implementation the system will include the "Seller-Paid Points and Fees" fee in the points and fees calculation. Home Loan Prohibited Practices Legislative Summary Alert: Credit Insurance (NJ AB 75, 4. a.) , (NJ SB 279, 3.) In addition to the credit insurance premiums tested by the financing of insurance premiums test, no creditor making a home loan shall finance any other life or health insurance or credit property insurance. Encouraging Default (NJ AB 75, 4. c.) , (NJ SB 279, 3.) No creditor shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a home loan that refinances all or any portion of that existing loan or debt. Late Payments (NJ AB 75, 4. d.) , (NJ SB 279, 3.) , (NJAC 3:30-1.3 "home loan", as proposed) , (NJAC 3:30-1.3 "home loan", final) No creditor shall charge a late payment fee in relation to a home loan except according to the following rules: The fee may not be charged more than once with respect to a single late payment. If a late payment fee is deducted from a payment made on the loan, and such deduction causes a subsequent default on a subsequent payment, no late payment fee may be imposed for such default. If a late payment fee has been once imposed with respect to a particular late payment, no such fee shall be imposed with respect to any future payment which would have been timely and sufficient, but for the previous default. No fee shall be charged unless the creditor notifies the borrower within 45 days following the date the payment was due that a late payment fee has been imposed for a particular late payment. No late payment fee may be collected from any borrower if the borrower informs the creditor that nonpayment of an installment is in dispute and presents proof of payment within 45 days of receipt of the creditor's notice of the late fee. The creditor shall treat each and every payment as posted on the same date as it was received by the creditor, servicer, creditor's agent, or at the address provided to the borrower by the creditor, servicer, or the creditor's agent for making payments. When a creditor that is a depository institution receives a home loan payment, the creditor shall treat the payment as posted on the banking day that the payment is received. For purposes of the posting requirements in this section, payments received by a servicer or agent of a depository institution shall be treated as received by the depository institution. A payment received by a creditor that is not a depository institution shall, if received before the end of business hours, be posted on the business day that it is received or, if received after the end of business hours, on the next business day. For purposes of the posting requirements in this section,
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payments received by a servicer or agent of a non-depository entity shall be treated as received by the non-depository entity. "Banking day" means the part of a day on which a depository institution is open to the public for carrying on substantially all of its banking functions. "Business day" means any day on which the office or offices of the creditor are open to the public to provide financial services. Home Loan Prohibited Practices Legislative Summary Alert (Continued): Acceleration of Indebtedness (NJ AB 75, 4. e.) , (NJ SB 279, 3.) No home loan shall contain a provision that permits the creditor, in its sole discretion, to accelerate the indebtedness. This provision does not prohibit acceleration of the loan in good faith due to the borrower's failure to abide by the material terms of the loan. Payoff Balance (NJ AB 75, 4. f.) , (NJ SB 279, 3.) No creditor shall charge a fee for informing or transmitting to any person the balance due to pay off a home loan or to provide a release upon prepayment. Payoff balances shall be provided within seven business days after the request. Liability Legislative Summary Alert: Home Loans, Manufactured Home Loans, Home Improvement Home Loans (NJ AB 75, 6. a.) , (NJ SB 279, 4.) , (NJAC 3:30-8.1, as proposed) , (NJAC 3:30-8.1, final) 1 If a home loan was made, arranged or assigned by a seller of manufactured homes or of home improvements to the dwelling of a borrower, or was made by or through a creditor to whom the borrower was referred by such a seller, the borrower may assert against the original creditor and any person who purchases or is otherwise assigned the loan all affirmative claims and any defenses that the borrower may have against such a seller of manufactured homes or home improvements, including any claims and defenses available under N.J.S.A. 46:10B-22 et seq. against a home improvement contractor retained by the seller of home improvements to make home improvements on the borrower's dwelling. The amounts of any such affirmative claims and defenses shall be limited to amounts required to reduce or extinguish the borrower's liability under the home loan, plus the total amount paid by the borrower in connection with the transaction, plus amounts required to recover costs, including reasonable attorney's fees against the creditor, any assignee or holder, in any capacity. 2 If a loan covered by (a) was made by the seller or assigned to a creditor by the seller, all payments made to the seller including down payments, deposits, periodic payments, late fees and other payments are considered paid in connection with the transaction. 3 If a loan covered by (a) was made by a creditor by way of a referral or arrangement through the seller, down payments, deposits, periodic payments, late fees and other payments made to the seller are not considered paid in connection with the transaction. Liability Legislative Summary Alert (continued): High-Cost Home Loans (NJ AB 75, 6. b.) , (NJ SB 279, 4.) , (NJAC 3:30-8.2, as proposed) , (NJAC 3:30-8.2, final) 1 Pursuant to N.J.S.A. 46:10B-27b, any person who purchases or is otherwise assigned a high-cost home loan shall be subject to all affirmative claims and any defenses with respect to the loan that the borrower may assert against the original creditor or broker of the loan; except that the liability thereunder shall not arise if the purchaser or assignee demonstrates, by a preponderance of the evidence, that a reasonable person exercising reasonable due diligence could not determine that the loan was a high-cost home loan. In any administrative action commenced under N.J.S.A. 46:10B-22 et seq. or N.J.A.C 3:30-1.1 et seq., it shall be presumed by the Department that a purchaser or assignee of a high cost home loan has exercised such due diligence if the purchaser or assignee demonstrates by a preponderance of the evidence that it: 1 Has in place, at the time of the purchase or assignment of the loan, policies that expressly prohibit its purchase or acceptance of assignment of any high-cost loan; 2 Requires by contract that all sellers or assignors of home loans represent and warrant to the purchaser or assignee that either: It will not sell or assign any high-cost home loan to the purchaser or assignee, or That the seller or assignor is a beneficiary of a representation and warranty from a previous seller or assignor to that effect; and 3 Exercises reasonable due diligence at the time of the purchase or assignment of home loans or within a reasonable period of time thereafter, which due diligence is intended by the purchaser or assignee to prevent it from purchasing or taking assignment of any high-cost loan. 2 With respect to a claim brought under N.J.S.A. 46:10B-27c, notwithstanding any other law to the contrary, a borrower acting only in an individual capacity may, within six years of the closing of a high-cost home loan, assert against the creditor or any subsequent holder or assignee of the home loan a violation of N.J.S.A. 46:10B-22 et seq. in connection with the loan as an original action. 3 With respect to a claim brought under N.J.S.A. 46:10B-27c, notwithstanding any other law to the contrary, a borrower acting only in an individual capacity may, at any time during the term of a high-cost home loan after an action to collect on the home loan or foreclose on the collateral securing the home loan has been initiated or the debt arising from the home loan has been accelerated or the home loan has become 60 days in default, assert against the creditor or any subsequent holder or assignee of the high-cost home loan any defense, claim or counterclaim.
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Pursuant to N.J.S.A. 46:10B-27c, the damages sought in any original action as referenced in (b) above, or in any claim or counterclaim as referenced in (c) above, shall be limited to amounts required to reduce or extinguish the borrowers liability under the home loan plus amounts required to recover costs, including reasonable attorney's fees not included in the principal amount of the loan. The limitations on assignee liability with respect to high cost home loans as set forth in (a) above shall not apply to assignee liability asserted on any ground other than N.J.S.A. 46:10B-27.b. Liability Legislative Summary Alert (continued): High-Cost Home Loans (NJ AB 75, 6. b.) , (NJ SB 279, 4.) , (NJAC 3:30-8.2, as proposed) , (NJAC 3:30-8.2, final) The limitations in N.J.A.C 3:30-1.1 et seq. shall apply to any assignee liability arising under N.J.S.A. 46:10B-27 regardless of whether an individual asserting assignee liability pursuant to N.J.A.C. 3:30-1.1 et seq. chooses to pursue such an action under the Consumer Fraud Act, as authorized under N.J.S.A. 46:10B-29a, or under the Act, as authorized under N.J.S.A. 46:10B-29b. Regardless of which alternative method for seeking damages against an assignee the borrower chooses to pursue, whenever a borrower alleges assignee or holder liability pursuant to N.J.S.A. 46:10B-27, the limitations and conditions set forth in the applicable subsections of N.J.S.A. 46:10B-27 shall apply to such assignee liability. Any borrower asserting a claim under N.J.S.A. 46:10B-22 et seq. may, in appropriate circumstances, recover damages under both N.J.S.A. 46:10B-27.a and 27.c from one assignee on the basis of separate claims brought simultaneously under N.J.S.A. 46:10B-27.a and 27.c in connection with the same loan transaction. In such a case the limitations on damages set forth in N.J.S.A. 46:10B-27 would apply to the respective claims made under N.J.S.A. 46:10B-27.a and 27.c. The limitations upon and conditions for assignee liability prescribed by N.J.S.A. 46:10B-27 may not be avoided by a borrower seeking to obtain separate compensatory and punitive damages against the same assignee. The limitations on damages set forth in N.J.S.A. 46:10B-27 apply to the total of all types of damages. If a seller of home improvements or manufactured homes is not otherwise involved in the transaction as specified in N.J.S.A. 46:20B-27.a, the loan shall not give rise to assignee liability pursuant to N.J.S.A. 46:10B-27.a. This rule applies irrespective of whether the loan is secured by a first lien, or by a second or subsequent lien (sometimes referred to as a "junior lien"), whether the transaction is a cash-out refinance, and whether the proceeds of the loan are used to pay for home improvements or to purchase a manufactured home. 1. A seller of manufactured homes or home improvements who has referred a borrower to a creditor shall be deemed to be otherwise involved as set forth in N.J.S.A. 46:10B-27. 2. Where a borrower refinances without the involvement of a seller of manufactured homes or home improvements as set forth in N.J.S.A. 46:10B-27.a and subsequently uses the funds obtained in the process to pay for a manufactured home or for home improvements, the seller of manufactured homes or home improvements shall not be deemed to be otherwise involved in the transaction. Liability Legislative Summary Alert (continued): High-Cost Home Loans (NJ AB 75, 6. b.) , (NJ SB 279, 4.) , (NJAC 3:30-8.2, as proposed) , (NJAC 3:30-8.2, final) The exercise of reasonable due diligence as referenced in N.J.S.A. 46:10B-27.b (3) does not, in all cases, require compliance review of one hundred percent of the loans being acquired. Depending upon the size of the loan pool being purchased or acquired by an assignee and/or the assignee being aware of information material to the determination of whether a lender engages in making high-cost home loans, including but not limited to any indication of the presence of high cost home loans in a loan pool, sampling, if properly performed, shall be considered reasonable due diligence by the Department. In order for sampling to be considered reasonable due diligence by the Department, purchasers or assignees shall, at a minimum, conduct quality control review of appropriate loan documentation at the beginning of the buyer/seller relationship, whenever a particular problem is identified, and throughout the relationship by random sampling. When a loan pool is very small or initial review has uncovered a high number of high cost loans, more extensive review is required to meet the reasonable due diligence standard. Creditors may utilize third party software packages or internally developed computer programs to comply with the requirements of N.J.S.A. 46:10B-27.b (3) or to determine whether loans are home loans or high cost home loans. Such software programs shall be calibrated and tested prior to use and periodically tested as part of an ongoing compliance review process. Periodic manual oversight and monitoring shall be done to ensure that the software is performing adequately and to evaluate matters not addressed by the software. A creditor may secure documentation from the borrower in which the borrower represents that no contractor or seller referred the borrower to the creditor, arranged the loan or was otherwise involved in facilitating the loan transaction. The Department shall consider such documentation when contemplating the exercise of its administrative authority pursuant to the Act. State Regulations No state license was selected for the loan. State Regulations Restricted Fees No state license was selected for the loan.
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LOAN DETAIL
Client Report Type: Post-Close Mortgage Loan
Lender Lender Name: Lender Loan Number Originator: MIN: License Type: DIDMCA Exempt: HUD Approved Lender: NMLS ID Company NMLS ID: Individual NMLS ID: Policies Default: Lending Policy: Borrower First Name: Total Income: Property Address:
Number City
Countrywide Bank, FSB Payless Mortgage Corp Not Configured No Yes
: : : :
Branch NMLS ID:
GSE (Fannie Mae public guidelines)
$9,292.10 / month
Last Name: DTI Ratio:
39.400%
Street Name County
Type (St, Ave, etc.) State
Direction Zip
Unit #
Egg Harbor Township Type: Occupancy: Loan Information Loan Amount:
NJ Detached SFD Primary Residence
08234 Number of Units:
$288,000.00 Fixed Refinance Cash-Out/Other No 78.950% 78.950% Conventional First Mortgage No Asset or Income Verification
Loan Amount:
(with Finance Charge)
$288,000.00 6.750% 6.834% $386,927.74 No 360 months 360 months 5.000% 15 days
(exclude PMI, MIP, Funding Fee financed)
Program Type: Loan Purpose: Purpose of Refinance: Refinancing Portfolio Loan: LTV Ratio: CLTV Ratio: Loan Type: Lien Type: Document Type:
Interest Rate: Undiscounted Rate: Disclosed APR: Disclosed Finance Charge: Irregular Payment Transaction: Maturity Term: Amortization Term: Late Charges: Grace Period:
Prepayment Penalty Program Name: Prepayment Penalty Program:
No Prepayment Penalty This Prepayment Penalty is defined by the following program: If the borrower makes a prepayment, he/she will not be required to pay a prepayment charge.
Prepayment Term:
0 months
Max. Prepayment Penalty Amount:

(for high-cost points & fees)
$0.00
Construction / Construction to Permanent Rate: Estimate Interest on: Amount Advanced Adjustable Rate Mortgage
Construction Term: Interest Reserve:
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ARM Margin: ARM Index: Ceiling: Floor: Graduated Payment Mortgage Rate: Potential Negative Amortization (Option ARM) Negative Amortization None Type:
First Adjustment: Subsequent Adjustment: Adjustment Rounding:
Cap Cap Round nearest 1/8
Period Period
Term: Buydown 1. 2. 3. 4. 5.
Rate: Rate: Rate: Rate: Rate:
Term: Term: Term: Term: Term:
Interest Only (excl. Negative Amortization and Option ARM) Term:
Dual Amortization Initial Amortization Term: Subsequent Amortization Term:
Period: Period:
Mortgage Insurance (PMI) Upfront Premium: or Cash/Credit Financed $0.00 Adjust Payments Due to Upfront Premium
Prepaid Finance Charge
Monthly Premium (Initial): or Monthly Premium (Renew): or
Period
Period Cancel at Calculate Premiums Using Loan Amount Cancel At Midpoint
Dates Application Date: Initial GFE Disclosure Date: Initial TIL Disclosure Date: Sec. 32 (HOEPA) Disclosure Date:
04/09/2007 05/09/2007 05/09/2007
Closing / Settlement Date: Funding / Disbursement Date: Date Rate Was Set:
05/09/2007 05/14/2007
800: Items Payable in Connection with Loan Prepaid Finance Charges 801 Loan Origination Fee 802 Loan Discount Fee 803 Appraisal Fee 804 Credit Report Fee $ $ Bona Fide - GSE Bona Fide - State $ 300.00 $ 18.00 Financed By Lender Compensation To Lender Lender Other Affiliate of Lender
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805 Lender Inspection Fee (performed prior to closing) Lender Inspection Fee (performed post closing) 806 Mortgage Insurance Application Fee 807 Assumption Fee Modification Fee Tie-in Fee Mortgage Broker Fee (Direct) Mortgage Broker Discount Fee (for NJ properties only) Mortgage Broker Fee (Indirect / POC) Yield Spread Premium (Indirect / POC) CLO Access Fee Application Fee Rate Lock Fee Commitment Fee Processing Fee Underwriting Fee Administration Fee Appraisal Review Fee Appraisal Re-Inspection Fee Flood Determination - Initial Fee Flood Determination - Life of Loan Fee Document Preparation Fee Document Signing Fee Courier / Messenger Fee Tax Related Service Fee Wire Transfer Fee Warehousing Fee Advance Mortgage Payments Credit Life Insurance Premium Accident Insurance Premium Health Insurance Premium Loss of Income Insurance Premium Debt Cancellation Fee Prepayment Penalty Compliance Audit / Quality Control Fee Seller-Paid Points and Fees Application Fee
$ $ $ $ $ $ $ $ $ $ 8,640.00 $ $ 170.00 $ $ $ $ $ $ $ $ 26.00 $ $ $ $ $ 80.00 $ $ $ $ $ $ $ $ $ $ $ 0.00 $ 525.00 $ $ $ $ $ $ $
Other Other Other Other Lender Other
Other Broker Other Lender Broker Lender Lender Lender Lender Affiliate of Lender Other Lender Lender Lender Affiliate of Lender Lender Other Other Other Other Other Other Other Other Other Lender
900: Items Required by Lender to be Paid in Advance Prepaid Finance Charges 901 Interest $ 958.68 for 16 day(s) Financed By Lender Compensation To Lender
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902 Mortgage Insurance Premium 903 Hazard Insurance Premium County Property Taxes Flood Insurance Premium
$ $ $ $ $ $ $ $
Other Other Other Other
1000: Reserves Deposited with Lender Prepaid Finance Charges 1001 1002 1003 1004 1005 Hazard Insurance Reserve Mortgage Insurance Reserve City Property Taxes Reserve County Property Taxes Reserve Annual Assessments $ 821.25 $ $ $ 1,308.33 $ $ $ $ $ $ Financed By Lender Compensation To Lender Other Lender Lender Other
1100: Title Charges Prepaid Finance Charges 1101 1102 1103 1104 1105 1106 1107 Settlement / Closing / Escrow Fee Abstract / Title Search Fee Title Examination Fee Title Insurance Binder Fee Title Document Preparation Fee Notary Fee Attorney's Fee Attorney's Fee (Other) 1108 Title Insurance 1109 Lender's Coverage 1110 Owner's Coverage Assignment Endorsement Fee Sub-Escrow Fee Reconveyance Fee Title Courier Fee Funding, Wire, or Disbursement Fee $ 350.00 $ $ $ $ $ 25.00 $ Excludable due to borrower choice $ Excludable due to borrower choice $ 1,112.00 $ $ $ $ $ $ 50.00 $ 20.00 $ $ $ $ $ Financed By Lender Compensation To Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other
1200: Government Recording and Transfer Charges Prepaid Finance Charges 1201 Recording Fee $ 325.00 Financed By Lender Compensation To Other
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1202 City / County / Tax / Stamps 1203 State Tax / Stamps Subordination Recording Fee Assignment Recording Fee Recording Service Fee Intangible Tax
$ $ $ $ $ $ $ $ $ $
Other Other Other Other Other Other
1300: Additional Settlement Charges Prepaid Finance Charges 1301 Survey Fee 1302 Pest Inspection Fee Architectural / Engineering Fee Building Permit $ $ $ $ $ $ $ $ $ Financed By Lender Compensation To Other Other Other Other
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1 record matched your search:
MIN:
Note Date: 05/09/2007!
MIN Status: Inactive ! ! Phone: (800) 669-6607 Phone: (202)752-7000
Servicer: BAC Home Loans Servicing, LP! ! ! Simi Valley, CA Investor: Fannie Mae! ! ! ! ! ! Washington, DC MERS & Securitization
Mortgage Electronic Registration System (MERS) has been named the beneciary for this loan. MERS was created to eliminate the need for the executing and recording of assignment of mortgages, with the idea that MERS would be the mortgagee of record. This would allow "MERS" to foreclose on the property, and at the same time, assist the lenders in avoiding the recording of the Assignments of Beneciary on loans sold. This saved the lenders money in manpower and the costs of recording these notes. It was also designed to "shield" investors from liability as a result of lender misconduct regarding the process of mortgage lending. MERS is simply an "articial" entity designed to circumvent certain laws and other legal requirements dealing with mortgage loans. By designating certain member employees to be MERS corporate ofcers, MERS has created a situation whereby the foreclosing agency and MERS "designated ofcer" has a conict of interest. Since neither MERS nor the servicer have a benecial interest in the note, nor do they receive the income from the payments, and since it is actually an employee of the servicer signing the Assignment in the name of MERS, the Assignment executed by the MERS employee is illegal. The actual owner of the note has not executed the Assignment to the new party. An assignment of a mortgage in the absences of the assignment and physical delivery of the note will result in a nullity. It must also be noted that the lender or other holder of the note registers the loan on MERS. Thereafter, all sales or assignments of the mortgage loan are accomplished electronically under the MERS system. MERS never acquires actual physical possession of the mortgage note, nor do they acquire any benecial interest in the Note. The existence of MERS indicated numerous violations of Unfair and Deceptive Acts and Practices due to the conicting nature and identity of the servicer and the beneciary. Each of these practices were intentionally designed to mislead the borrower and benet the lenders. So the question becomes, is MERS the foreclosing party or the Servicer? Since the Servicer is the party initiating the foreclosure and they take the documents to their own employee who has also been designated as a "Corporate Ofcer of MERS", and who conveniently signs the document for MERS, aren't they the "foreclosing party"?
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Is MERS the Benecial Owner of the Note?

1. MERS is named as the beneciary on the Deed of Trust and holds only legal title to the interest granted by Borrower in this Security Instrument...has the right: to exercise any or all of those interest, including, but not limited to, releasing and canceling this security instrument. 2. MERS has no actual possession of the Note, though they claim to hold the Note. 3. MERS receives no payments or income from the monthly payments. This money goes to the ultimate Investor. The Investor has the benecial interest in the Note by reason of the Investor receiving the payments. 4. MERS agreement says that MERS shall at all time comply with the instructions of the holder of mortgage loan promissory notes. Additionally, it says "in the absence of contrary instructions from the benecial owner, MER may rely on instructions from the servicer shown on the MERS system in accordance with these rules and the procedures with respect to transfers of benecial ownership. 5. MERS has testied in Florida Courts that they are not the benecial owner of the note.
Assignment of Beneciary
MERS does not record the assignment of beneciary as required by law, until the foreclosure process starts and the Notice of Default has been led, and apparently, only when it appears that the borrower will not be able to reinstate the loan and then foreclosure is inevitable. It maintains itself as the beneciary throughout the entire process up to foreclosure. MERS has represented in Florida Courts that its sole purpose is as a system to track mortgages. It has stated that it does not do the entries itself, but the lenders and servicers do. When an Assignment of Beneciary is executed, it is the member servicer or lender that goes to the website, downloads the necessary forms, completes the forms and then takes it to the designated "MERS ofcer" to sign. MERS agreements state that MERS and the Member agree that: (i) the MERS System is not a vehicle for creating or transferring benecial interest in mortgage loans, (ii) transfer of servicing interests reecting on MERS System are sUbject to the consent of the benecial owner. Since neither MERS nor the servicer have a benecial interest in the note, nor do they receive the income from the payments, and since it is actually an employee of the servicer signing the Assignment in the name of MERS, this begs the question: Is the assignment executed by the MERS employee even legal, since the actual owner of the note has not executed the assignment to the new party? A good indicator might be in Sobel v Mutual Development, Inc, 313 So 2d 77 (1st DCA Fla 1975). An assignment of a mortgage in the absence of the assignment and physical delivery of the note in question is a nullity.
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Possession of the Note & Holder in Due Course

Possession of the Note is a key argument coming to the forefront. The foreclosing entity must prove possession and ownership of the original Note in order to foreclose. This comes to the forefront because it has been reported that upwards of 40% of the Notes are missing and cannot be found. MERS is once again involved in this. In Judicial Foreclosure states, MERS foreclosure lawsuits often include a Lost, Missing, or Destroyed Afdavit. This afdavit "testies" that the Note cannot be found, and that the Note prior to being lost was in the possession of MERS. This has become very problematic for MERS, since they have admitted in Courts that they do not own the Note or even hold the Note. If this is so, then MERS is likely ling fraudulent Afdavits. When challenged, one defense that MERS uses to support its "legal standing" is that the servicer has possession of the Note and Deed. MERS, by the act of having its own "Ofcers" as employees of the servicer, entitles it to foreclose on behalf of the servicer and the beneciary. When confronted with this defense, the response should be for the servicer to produce the note. It must also be noted that the lender or other holder of the note registers the loan on MERS. Thereafter, all sales or assignments of the mortgage loan are accomplished electronically under the MERS system. MERS never acquires actual physical possession of the mortgage note, nor do they acquire any benecial interest in the Note.
Securitization Process
Securitization is the name for the process by which the nal investor for the loan ended up with the loan. It entailed the following: 1. Mortgage broker had client who needed a loan and delivered the loan package to the lender. 2. The lender approved the loan and funded it. This was usually through ''warehouse" lines of credit. The lender hardly ever used their own money instead using the warehouse line that had been advanced to the lender by major Wall Street rms like J.P. Morgan. 3. The lender "sold" the loan to the Wall Street lender, earning from 2.5 - 8 points per loan. This entity is known also as the mortgage aggregator. 4. The loan, and thousands like it, are sold together to an investment banker. 5. Investment banker sells the loans to a securities banker. 6. Securities banker sells the loans to the nal investors, as a Securitized Instrument,
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where a Trustee is named for the investors, and the Trustee will administer all bookkeeping and disbursement of funds. 7. The issue with the securitization process is that when the Securitized Instrument was sold, it was split apart and sold in tranches, (in slices like a pie). There were few or no records kept of which notes went into which tranche. Nor were their records of how many investors bought into each particular tranche. Additionally, there were no assignments designed or signed in anticipation of establishing legal standing to foreclose. 8. The tranches were rated by Rating Agencies at the request of the Investment Bankers who paid the Rating Agencies. 9. When the tranches were created, each "slice" was given a rating, "AAA, AA, A, BBB, BB, etc. The ratings determined which tranche got "paid" rst out of the monthly proceeds. If signicant numbers of loans missed payments, or went into default, the AAA tranche would receive all money due, and this went on down the line. The bottom tranches with the most risk would receive the leftover money. These were the rst tranches to fail. Even if the defaulting loans were in the AAA tranche, the AAA tranche would still be paid and the lowest tranche would not. Wall Street, after the 2000 Dot.com crash, had large amounts of money sitting on the sidelines, looking for new investment opportunities. Returns on Investments were dismal, and investors were looking for new opportunities. Wall Street recognized that creating Special Investment Vehicles offered a new investment tool that could generate large commissions.
Other Pertinent Facts of Securitization

1. Wall Street created pooling agreements where they dened in the agreements the loans that they would accept for each investment vehicle. They executed agreements with the lenders and then immediately issued warehouse lines of credit to the lenders. 2. Lenders then let brokers know the loan parameters to meet the pooling agreement guidelines and the brokers went out and found the borrowers. 3. Wall Street took all the loans, packaged them up and sold them as bonds and other security instruments to other investors, i.e. Joes Pension, and paid off original investors or reissued new line of credit, and earned commissions on both ends. 4. The process was repeated time and again. 5. What we do know now is that in most cases, the reality is that the reported lender on the Deed of Trust was NOT the actual lender. The actual lender who lent the money was the Wall Street Investment Bank. They simply rented the license of the lender, so that they would not run afoul of banking regulations and/or avoid liability and tax issues. For all purposes, Wall Street was the true lender and there are arguments that suggest that Disclosures should have been
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required naming Wall Street as the lender. Now it can be easier to understand how possession of the Note and ownership of the Note play a signicant part. In most cases, it is unknown which tranche will contain any particular note. Nor will it be known how many investors, and who bought the individual tranches without signicant and time-consuming investigation. Hence, without the "True Owners" of the note stepping forward to demand foreclosure, any foreclosure that was securitized may be completely unlawful.
Assignee Liability
Assignee liability is another issue being contested. Under TILA and RESPA, if on the face of the loan documents it is evident that there are violations of the statutes, then assignees have a signicant liability when they assume the loan. However, the question arises as to if assignee liability can be claimed when there are no violations on the face of the documents. It is believed that MERS became the "beneciary" for so many notes to address the Assignee Liability problem. By keeping MERS as the beneciary, and avoiding the recording of assignments, it becomes more difcult to determine assignee liability and holder in due course issues. This could offer "cover" for all the parties participating in the Securitization process, since no Assignments were recorded, and "proof of ownership" of the note could not be easily determined. The only way to determine ownership of the Notes would be to track the monthly payments made to the investors, determining which party received the monthly payment. This would be time consuming and likely only Discovery would prove the process necessary to get this information. In Cazares v Pacic Shore Funding, CD. Cal. Jan 3, 2006, assignee that actively participated in original lender's act and dictated loan terms may be liable under UDAP. The question then arises as to assignments further down the "chain of title". Under these circumstances, the UDAP codes can be utilized for attacking the lenders. Show fraud and other causes of action, then the contracts can be "voided or rescinded" common law and UDAP codes, especially CA B&P 17200, and CA Civil Code 1689, which allows for contract rescission.
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Summary of Applicable Laws and Other Information
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RESPALaw Sec.3500.6Specialinformationbookletattimeofloanapplication
(a) Lendertoprovidespecialinformationbooklet.Subjecttotheexceptionssetforthinthisparagraph,the lendershallprovideacopyofthespecialinformationbooklettoapersonfromwhomthelenderreceives, orforwhomthelenderpreparesawrittenapplicationforafederallyrelatedmortgageloan.Whentwoor morepersonsapplytogetherforaloan,thelenderisincomplianceifthelenderprovidesacopyofthe booklettooneofthepersonsapplying. (1) Thelendershallprovidethespecialinformationbookletbydeliveringitorplacingitinthemailtothe applicantnotlaterthanthreebusinessdays(asthattermisdefinedin3500.2)aftertheapplicationis receivedorprepared.However,ifthelenderdeniestheborrower'sapplicationorcreditbeforetheendof thethreebusinessdayperiod,thenthelenderneednotprovidethebooklettotheborrower.Ifaborrower usesamortgagebroker,themortgagebrokershalldistributethespecialinformationbookletandthe lenderneednotdoso. (2) Inthecaseofafederallyrelatedmortgageloaninvolvinganopenendedcreditplan(asdefinedin226.2(a) (20)ofRegulationZ(12CFR))alenderormortgagebrokerthatprovidestheborrowerwithacopyofthe brochureentitled"WhenYourHomeisontheLine:WhatyoushouldknowaboutHomeEquitylinesof credit",oranysuccessorbrochureissuedbytheBoardofGovernorsoftheFederalReserveSystem,is deemedtobeincompliancewiththissection. (3) Inthecatagoriesoftransactionssetforthattheendofthisparagraph,thelenderormortgagebrokerdoes nothavetoprovidethebooklettotheborrower.Undertheauthorityofsection19(a)ofRESPA(12U.S.C. 2617(a)),thesecretarymaychoosetoendorsetheformsorbookletsofotherFederalagencies.Insuchan event,therequirementsfordeliverybylendersandtheavailabilityofthebookletoralternativematerials forthesetransactionswillbesetforthinaNoticeintheFederalRegister.Thisparagraphshallapplytothe followingtransactions: (i) Refinancingtransactions;
(ii) Closedendloansasdefinedin12CFR226.2(a)(10)ofRegulationZ,whenthelendertakesa subordinatelien; (iii) Reversemortgages;and (iv) Anyotherfederallyrelatedmortgageloanwhosepurposeisnotthepurchaseofa1to4family residence (b) Revision.Thesecretarymay,fromtimetotime,revisethespecialinformationbookletbypublishinga noticeintheFederalRegister. (c) Reproduction.Thespecialinformationbookletmaybereproduced,inanyform,providedthatnochangeis madeotherthanasprovidedunderparagraph(d)ofthissection.Thespecialinformationbookletmaynot bemadeapartofalargerdocumentforpurposesofdistributionunderRESPAandthissection.Anycolor, size,andqualityofpaper,typeofprint,andmethodofreproductionmaybeusedsolongasthebookletis clearlylegible.
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(d) Permissiblechanges.(1)Nochangesto,deletionsfrom,oradditionstothespecialinformationbooklet currentlyprescribedbhytheSecretaryshallbemadeotherthanthosespecifiedinthisparagraph(d)orany othersapprovedinwritingbytheSecretary.ArequestoftheSecretaryforapprovalofanychangesshallbe submittedinwritingtotheaddressindicatedin3500.3,statingthereasonswhytheapplicantbelievessuch changes,deletions,oradditionsarenecessary. (2) Thecoverofthebookletmaybeinanyformandmaycontainanydrawings,pictures,orartwork,provided thewords"settlementcosts"areusedinthetitle.Names,addresses,andtelephonenumbersofthe lender,orothersimilarinformation,mayappearonthecover,butnotdiscussionofthematterscoveredin thebookletshallappearonthecover. (3) ThespecialinformationbookletmaybetranslatedintolanguagesotherthanEnglish.
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TILALaw RegulationZ
RegulationZ(12CFR226)implementstheTruthinLendingAct(TILA)(15USC1601etseq),whichwasenactedin 1968asTitleIoftheConsumerCreditProtectionAct.Sinceitsimplementation,theregulationhasbeenamended manytimestoincorporatechangestotheTILAortoaddresschangesintheconsumercreditmarketplace. Inthe1990's,RegulationZwasamendedtoimplementtheHomeOwnershipandEquityProtectionActof1994, whichimposednewdisclosurerequirementsandsubstantivelimitationsoncertainhighercostclosedendmortgage loansandincludednewdisclosurerequirementsforreversemortgagetransactions. TheTruthinLendingActisintendedtoensurethatcredittermsaredisclosedinameaningfulwaysothatconsumers cancomparecredittermsmorereadilyandmoreknowledgeably. DeterminationoftheFinanceChargeandtheAPR (A) Thefinancecharge(226.4)isameasureofthecostofconsumercreditrepresentedindollarsandcents. AlongwiththeAPRdisclosures,thedisclosureofthefinancechargeiscentraltotheuniformcreditcost disclosureenvisionedbytheTILA.OneofthemorecomplextasksunderRegulationZisdetermining whetherachargeassociatedwithanextensionofcreditmustbeincludedinorexcludedfromthedisclosed financecharge.Thefinancechargeinitiallyincludesanychargethatis,orwillbe,connectedwithaspecific loan.Chargesimposedbythirdpartiesarefinancechargesiftheinstitutionrequiresuseofthethirdparty. Chargesimposedbysettlementorclosingagentsarefinancechargesiftheinstitutionrequiresthespecific servicethatgaverisetothechargeandthechargeisnototherwiseexcluded. (B) Aprepaidfinancecharge(226.18(b))isanyfinancechargethat(1)ispaidseparatelytothefinancial institutionortoathirdparty,incashorbycheck,beforeoratclosing,settlement,orconsummationofa transactionor(2)iswithheldfromtheproceedsofthecreditatanytime.Prepaidfinancecharges effectivelyreducetheamountoffundsavailablefortheconsumer'suse,usuallybeforeoratthetimethe transactionisconsummated. (C) ForcertaintransactionsconsummatedonorafterSeptember30,1995,thefinancechargetolerancesare asnotedbelow: (1) Creditsecuredbyrealpropertyoradwelling,thedisclosedfinancechargeisconsidered accurateifitdoesnotvaryfromtheactualfinancechargebymorethan$100.00.Also, overstatmentsarenotviolations. (2) Rescissionrightsafterthethreebusinessdayrescissionperiod,thedisclosedfinancechargeis consideredaccurateifitdoesnotvaryfromtheactualfinancechargebymorethanonehalfof 1percentofthecreditextended. (3) Rescissionrightsinforeclosure,thedisclosedfinancechargeisconsideredaccurateifitdoes notvaryfromtheactualfinancechargebymorethan$35.00.Also,overstatementsarenot consideredviolationsandtheconsumerisentitledtorescindifamortgagebrokerfeeisnot includedasafinancecharge. (D) Creditcostsmayvarydependingontheinterestrate,theamountoftheloanandothercharges,thetiming andamountsofadvances,andtherepaymentschedule(226.22).TheAnnualPercentageRate(APR),which mustbedisclosedinnearlyallconsumercredittransactions,isdesignedtotakeintoaccountallrelevant factorsandtoprovideauniformmeasureforcomparingthecostsofvariouscredittransactions.
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(E) TheAPRisameasureofthetotalcostofcredit,expressedasanominalyearlyrate.Itrelatestheamountand timingofvaluereceivedbytheconsumertotheamountandtimingofpaymentsmadebytheconsumer.The disclosureoftheAPRiscentraltotheuniformcreditcostdisclosureenvisionedbytheTILA. (F) Thedisclosedannualpercentagerate(APR)onaclosedendtransactionisconsideredaccurateifforregular transactions(includinganysingleadvancetransactionwithequalpaymentsandequalpaymentperiodsor transactionwithanirregularfirstorlastpaymentand/oranirregularfirstpaymentperiod),theAPRiswithin oneeighthof1percentagepointoftheAPRcalculatedunderRegulationZ(section226.23(a)(2)). (G) Ifforirregulartransactions(includingmultipleadvancetransactionsandothertransactionsnotconsidered regular),theAPRiswithinonequarterof1percentagepointoftheAPRcalculatedunderRegulationZ (section226.22(a)(3)). (H) Ifformortgagetransactions,theAPRiswithinoneeighthof1percentagepointforregulartransactionsor onequarterof1percentagepointforirregulartransactionsandtherateresultsfromthedisclosedfinance chargewouldbeconsideredaccurateundersection226.18(d)(1)orsection226.23(g)or(h)ofRegulationZ (section226.22(a)(4)).
VariableRateLoans(226.18(f))
Ifthetermsofthelegalobligationallowthefinancialinstitution,afterconsummationofthetransaction,toincrease theAPR,thefinancialinstitutionmustfurnishtheconsumerwithcertaininformationonvariablerates.Someofthe moretransactionspecificvariableratedisclosurerequirementsundersection226.18: (A) Disclosuresforthevariablerateloansmustcoverthefulltermofthetransactionandmustbebasedonthe termsineffecatthetimeofconsummation. (B) IFthevariableratetransactionincludeseitherasellerbuydownthatisreflectedinacontractoraconsumer buydown,thedisclosedAPRshouldbeacompositeratebasedonthelowerrateforthebuydownperiodand theratethatisthebasisforthevariableratefeaturefortheremainderoftheterm. (C) Iftheinitialrateisnotdeterminedbytheindexorformulausedtomakelaterinterestrateadjustments,asin adiscountedAPRmustreflectacompositeratebasedontheinitialrateforaslongasitisappliedand,for theremainderoftheterm,theindexorformulaatthetimeofconsummation(thatis,thefullyindexedrate). (D) Ifaloancontainsarateorpaymentcapthatwouldpreventtheinitialrate,orpaymentatthetimeofthe adjustment,fromchangingtothefullyindexedrate,theeffectofthatrateorpaymentcapneedstobe reflectedinthedisclosure. (E) Theindexatconsummationneednotbeusedifthecontractprovidesforadelayinimplementationof changesinanindexvalue.Forexample,thecontractindicatesthatfutureratechangesarebasedonthe indexvalueineffectforsomespecifiedperiod,suchasfortyfivedaysbeforethechangedate.Instead,the financialinstitutionmayuseanyratefromthedateofconsummationbacktothebeginningofthespecified period(forexample,duringthepreviousfortyfivedayperiod).
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SpecialRulesforCertainHomeMortgageTransactions
Therequirementsofsection226.32applytoaconsumercredittransactionsecuredbytheconsumer'sprincipal dwellinginwhicheither: (A) TheAPRatconsummationwillexceedbymorethan8percentagepointsforfirstlienmortgageloans,orby morethan10percentagepointsforsubordinatelienmortgageloans,theyieldonTreasurysecuritieshaving periodsofmaturitycomparabletotheloan'smaturity(asofthe15thdayofthemonthimmediately preceedingthemonthinwhichtheapplicationoftheextensionofcreditisreceivedbythecreditor). (B) Thetotalpointsandfeespayablebytheconsumeratorbeforetheloanclosingwillexceedthegreaterof8 percentofthetotalloanamountoradollaramountthatisadjustedannuallyonthebasisofchangesinthe consumerpriceindex. Thefollowingareexemptfromsection226.32: (A) Residentialmortgagetransactions(generallypurchasemoneymortgages). (B) Reversemortgagetransactionssubjecttosection226.33ofRegulationZ. (C) OpenendcreditplanssubjecttosubpartBoftheregulation.
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TILALaw RegulationB Sec.202.9Notifications

(g)DisclosureofCreditScoresbyCertainMortgageLenders (1)Ingeneral,anypersonwhomakesorarrangesloansandwhousesconsumercreditscore,asdefinedin subsection(f),inconnectionwithanapplicationinitiatedorsoughtbyaconsumerforaclosedendloanorthe establishmentofanopenendloanforaconsumerpurposethatissecuredb1to4unitsofresidentialrealproperty (hearafterinthissubsectionreferredtoasthe"lender")shallprovidethefollowingtotheconsumerassoonas reasonablypracticable: (A)InformationRequiredunderSubsection(f) (i) Ingeneral,acopyoftheinformationindentifiedinsubsection(f)thatwasobtainedfromaconsumer reportingagencyorwasdevelopedandusedbytheuseroftheinformation.
(ii) Noticeundersubparagraph(D).Inadditiontotheinformationprovidedtoitbyathirdpartythatprovided thecreditscoreorscores,alenderisonlyrequiredtoprovidethenoticecontainedinsubparagraph(D). (B)DisclosuresinCaseofAutomatedUnderwritingSystem (i) Ingeneral,ifapersonthatissubjecttothissubsectionusesanautomatedunderwritingsystemto underwritealoan,thatpersonmaysatisfytheobligationtoprovideacreditscorebydisclosingacredit scoreandassociatedkeyfactorssuppliedbyaconsumerreportingagency.
(ii) Numericalcreditscore.However,ifanumericalcreditscoreisgeneratedbyanautomatedunderwriting systemusedbyanenterprise,andthatscoreisdisclosedtotheperson,thescoreshallbedisclosedtothe consumerconsistentwithsubparagraph(C). (iii) Enterprisedefined.Forpurposesofthissubparagraph,theterm"enterprise"hasthesamemeaningasin paragraph(6)ofsection1303iftheFederalHousingEnterprisesFinancialSafetyandSoundnessActof 1992. (C)Disclosuresofcreditscoresnotobtainedfromaconsumerreportingagency. Apersonthatissubjecttotheprovisionsofthissubsectionandthatusesacreditscoreotherthanacreditscore providedbyaconsumerreportingagency,maysatisfytheobligationtoprovideacreditscorebydisclosingacredit scoreandassociatedkeyfactorssuppliedbyaconsumerreportingagency. (D)Noticetohomeloanapplicants.Acopyofthefollowingnotice,whichshallincludethename,address,and telephonenumberofeachconsumerreportingagencyprovidingacreditscorethatwasused: "NoticeToTheHomeLoanApplicant" "Inconnectionwithyourapplicationforahomeloan,thelendermustdisclosedtoyouthescorethataconsumer reportingagencydistributedtousersandthelenderusedinconnectionwithyourhomeloan,andthekeyfactors affectingyourcreditscores."
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"Thecreditscoreisacomputergeneratedsummarycalculatedatthetimeoftherequestandbasedoninformation thataconsumerreportingagencyorlenderhasonfile.Thescoresarebasedondataaboutyourcredithistoryand paymentpatterns.Creditscoresareimportantbecausetheyareusedtoassistthelenderindeterminingwhether youwillobtainaloan.Theymayalsobeusedtodeterminewhatinterestrateyoumaybeofferedonthemortgage. Creditscorescanchangeovertime,dependingonyourconduct,howyourcredithistoryandpaymentpatterns change,andhowcreditscoringtechnologieschange.Becausethescoreisbasedoninformationinyourcredit history,itisveryimportantthatyoureviewthecreditrelatedinformationthatisbeingfurnishedtomakesureitis accurate.Creditrecordsmayvaryfromonecompanytoanother." "Ifyouhavequesitonsaboutyourcreditscoreorthecreditinformationthatisfurnishedtoyou,contactthe consumerreportingagencyattheaddressandtelephonenumberprovidedwiththisnotice,orcontactthelender,if thelenderdevelopedorgeneratedthecreditscore." Theconsumerreportingagencyplaysnopartinthedecisiontotakeanyactionontheloanapplicationandisunable toprovideyouwithspecificreasonsforthedecisiononaloanapplication. "Ifyouhavequesitonsconcerningthetermsoftheloan,contactthelender." (E)Actionsnotrequiredunderthissubsection.Thissubsectionshallnotrequireanypersonto: (i) explaintheinformationprovidedpursuanttosubsection(f);
(ii) discloseanyinformationotherthanacreditscoreorkeyfactors,asdefinedinsubsection(f); (iii) discloseanycreditscoreorrelatedinformationobtainedbytheuserafteraloanhasclosed; (iv) providemorethanonedisclosureperloantransaction; (v) orprovidethedisclosurerequiredbythissubsectionwhenanotherpersonhasmadethedisclosuretothe consumerforthatloantransaction. (F)NoObligationforContent (i) Ingeneral,theobligationofanypersonpursuanttothissubsectionshallbelimitedsoleytoprovidinga copyoftheinformationthatwasreceivedfromtheconsumerreportingagency.
(ii) Limitonliability.Nopersonhasliabilityunderthissubsectionforthecontentofthatinformationorforthe omissionoranyinformationwithinthereportprovidedbytheconsumerreportingagency. (G)Persondefinedasexcludingenterprise.Asusedinthissubsection,theterm"person"doesnotincludean enterprise(asdefinedinparagraph(6)ofsection1303oftheFederalHousingEnterprisesFinancialSafetyand SoundnessActof1992).
(2)ProhibitiononDisclosureClausesNullandVoid (A) Ingeneral,anyprovisioninacontractthatprohibitsthedisclosureofacreditscorebyapersonwhomakes orarrangesloansoraconsumerreportingagencyisvoid. (B) Noliabilityfordisclosureunderthissubsection,alendershallnothaveliabilityunderanycontractual provisionfordisclosureofacreditscorepursuanttothissubsection.
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GLBLaw(Gramm,Leach,BlileyAct) FederalTradeCommission BureauofConsumerProtection DivisionofFinancialPractices TheGrammLeachBlileyAct PrivacyofConsumerFinancialInformation IV.ConsumersandCustomers A.Consumers

Definition:A"consumer"isanindividualwhoobtainsorhasobtainedafinancialproductorservicefromafinancial institutionthatistobeusedprimarilyforpersonal,family,orhouseholdpurposes,orthatindividual'slegal representative.
ExamplesofConsumerRelationships:
*Applyingforaloan *ObtainingacashfromaforeignATM,evenifitocurrsonaregularbasis *Cashingacheckwithacheckcashingcompany *Arrangingforawiretransfer
GeneralObligationstoConsumers
Provideaninitial(or"shortform")noticeabouttheavailabilityoftheprivacypolicyifthefinancialinstitutionshares informationoutsidethepermittedexceptions. Provideanoptoutnoticewiththeinitialnoticeorseparatelypriortothefinancialinstitutionsharingnonpublic personalinformationaboutthemotnonaffiliatedthirdparties. Provideanoptoutnoticewitha"reasonableopportunity"tooptoutbeforedisclosingnonpublicpersonal informationaboutthemotnonaffiliatedthirdparties,suchas30daysfromthedatethenoticeismailed. Ifaconsumerelectstooptoutofallorcertaindisclosures,afinancialinstitutionmusthonortheoptoutdirectionas soonasisreasonablypracticableaftertheoptoutisreceived. Ifyouchangeyourprivacypracticessuchthatthemostrecentprivacynoticeyouprovidedtoaconsumerisno longeraccurate(e.g.youdiscloseanewcategoryofNPItoanewnonaffliatedthirdpartyoutsideofspecific exceptionsandthosechangesarenotadequatelydescribedinyourpriornotice),youmustprovidenewrevisedand optoutnotices.
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ALTERNATIVE CAUSES OF ACTION

Even if there may have not been any technical violations found in your loan through the audit process, there may still be a cause of action against the lender. There are a number of areas of law that address the predatory lending and unfair trade practices. The availability of these subsequent causes of action will depend greatly on the specific facts of your case.
Contractual Causes of Action

Breach of Contract Borrower may claim that the Lender breached its contractual obligations to Plaintiff, including, without limitation, those obligations created by the Note and Security Agreement and its oral agreement to make a residential mortgage loan as described on the Loan Application. Breach of Oral Agreement - Campbell v. Machias, 865 F. Supp. 26 (D. Me. 1994). Borrower may allege that when they applied for a loan, the lender's loan officer made certain statements and representations about the nature and character of the loan. For example she would be required to make a five-percent downpayment and security on the home but no security on her land. Borrowers can claim that, by accepting their loan application, the Lender offered her a loan in compliance with those representations. Borrower further contends that, when they accepted this offer, the parties entered into an oral agreement. Borrower argues that the Lender breached this oral agreement by failing to comply with the representations made but the loan officer. It should be noted that an oral promise to enter into a home loan agreement, which usually extends over a number of years, would very likely present problems under most states Statute of Frauds. Translation of Contracts negotiated in language other than English - CA Civil Code 1632(b) CA Civil Code 1632(b) states that any person engaged in trade or business who negotiates primarily in Spanish, Chinese, Tagalong, Vietnamese, or Korean, orally or in writing, in the course of entering into any of the following, shall deliver to the other party to the contract or agreement and prior to the execution thereof, a translation of the contract or agreement in the language in which the contract or agreement was negotiated, which includes a translation of every term and condition in that contract or agreement A borrower, who negotiated the loan in a language other than English, must be provided with a copy of the agreement in the language in which you negotiated. This applies to
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disclosures required by Regulation M, Regulation Z, Truth in Lending Act, or any other disclosures promulgated by the Board of Governors of the Federal Reserve System If the borrower is not provided a copy of the agreement in the language in which it was negotiated in then Cal. Civ. Code 1632(k) states upon a failure to comply with the provision of this section, the person aggrieved may rescind the contract or agreement.
Tort Claims
Intentional Infliction of Emotional Distress - FDIC v. S. Prawer & Co., 829 F.Supp. 439, 449 (D.Me.1993) Borrower may possibly make a claim of negligent and intentional infliction of emotional distress. This is only applicable in instances where the Lender has done something above and beyond the traditional notions of reasonableness. For example, a bank officer refusing to provide information, berating the borrower and calling them names in a loud voice in the middle of the bank office when a large number of people were present and could hear him. Another example of this would be the bank attempting to disrupt the borrowers relationship with their attorney and to intimidate them into halting their investigation by taking extreme actions, including filing false criminal charges against her for stealing the bank's file on the burrowers loan. To succeed on a claim for intentional infliction of emotional distress a plaintiff must show that: The defendant acted intentionally, recklessly or was substantially certain that severe emotional distress would result from its conduct; The defendant's conduct was so extreme and outrageous as to exceed all possible bounds of decency and must be regarded as atrocious and utterly intolerable in a civilized community; The defendant's conduct caused the plaintiff emotional distress; and Plaintiff's emotional distress was so severe that no person reasonably could be expected to endure it. Negligent Infliction of Emotional Distress - Prawer, 829 F.Supp. 451. The borrower may bring a claim of negligent infliction of emotional. A claim of negligent infliction of emotional distress requires a plaintiff to prove: The defendant acted negligently, That psychic injury was foreseeable given the nature of the defendant's conduct, and The plaintiff suffered severe emotional distress as a result of the defendant's negligence. Fraud/Misrepresentation The traditional elements of fraud are frequently more difficult to establish than a deception claim under an Unfair Deceptive Acts and Practices (UDAP) statute. However, in some instances fraud causes of action can be used quite effectively.
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People Trust & Saving Bank v. Humphrey, 451 N.E. 2d 1104 (Ind. Ct. App. 1983). In this case, the consumers went to their own bank for a home construction loan. The bank promised them a good loan at a 9.5% rate. That was merely the initial rate. The permanent financing was actually a variable rate loan and included a clause that allowed the bank to demand full payment at their discretion. The court held that when parties to a contract have prior understanding about the contract terms, and the party responsible for drafting the contract includes contrary terms and then allows the other party to sign it without informing him of the changes, the drafters conduct is fraudulent. The court in Humphrey dismissed the lenders foreclosure, reformed the contract by deleting the demand and variable rate clauses, and awarded $1000 actual and $40,000 punitive damages. Greene v. Gibraltar Mortgage Investment Corp, 488 F. Supp. 177 (D.D.C. 1980), 839 F.2d 680 (D.C. Cir. 1980). This was another misrepresentation case. The court found the failure to disclose an unconscionably high broker fee and the lenders charging of interest on that fee to be a misrepresentation. The lender also falsely represented the loan amount and claimed to offer a market interest rate. Accordingly, the court voided the promissory note and deed of trust and permanently enjoined foreclosure proceedings. Mahaffe v. Investors National Security, 747 P.2d 890 (Nev. 1987). This case involved a common home improvement fraud. The borrowers were promised home insulation which would cut fuel consumption in half, the borrowers home would be used for promotional purposes, and the total cost would be $5300. work was begun before the 3 day cooling off period, but never completed; what was done was done improperly. The contractors induced the borrowers to sign a completion certificate despite the incomplete work by threatening them with skyrocketing interest rates and troubles. The assignee tried to foreclose but the Nevada Supreme Court found the contract to be null and void because of the fraudulent inducement and failure of consideration on the contractors part. First Charter National Bank v. Ross, 29 Conn. App. 667, 617 A.2d 909 (1992). Fraud may also be available as a defense when a borrower is tricked by a family member into signing mortgage documents. In this case a wife was allowed to assert fraud as a special defense to foreclosure action when her husband had given her loan documents to sign with the signature page on top, had discouraged her from looking at the documents, and had told her that the documents had nothing to do with their home. The court ruled that the defense of fraud was not barred by the general rule that a person has a duty to read what they sign and that notice of the content of signed documents is imputed. The court said the official rule does not apply when there is fraud and only applies if nothing is said to mislead the person signing. It should be noted, however, that some courts have refused to invalidate a mortgage when the fraud was committed by a party other than the
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lender and the lender was not involved in or aware of the fraud. Family First Fed. Sav. Bank v. De Vincentis, 284 N.J. Super. 503, 665 A.2d 1119 (1995). Estoppel When various and conflicting promises in the loan origination process were made by a lender, a court may find that the effect of some of the promises is to estop the lender from enforcing others. In First State Bank v. Phillips, 13 Ark. App. 157, 681 S.W.2d 408 (1984), the court held that a bank was estopped from enforcing a balloon payment clause in a note and dismissed the foreclosure. The consumer in Phillips had assumed a mortgage extended by the bank to the person from whom the consumer bought the house. The mortgage indicated it would be fully paid with monthly payments. A separate promissory note provided that after a period of regular monthly payments, the balance of the note would be due in a single lump-sum balloon payment. The mortgage which the consumer saw did not contain the balloon payment. When the consumer talked to bank employees about assuming the mortgage, the balloon payment was not disclosed. In dismissing the foreclosure, the court found that the nondisclosure of the balloon payment forfeited the banks right to enforce it. Incompetence Contracts entered into by persons who are deemed incompetent are generally voidable. Krasner v. Berk, 366 Mass. 464, 319 N.E.2d 897 (1974). This basic principle of contract law may be used to invalidate mortgage contracts made by persons who are too young to form a valid contract, or who suffer from temporary or permanent mental incapacity at the time the mortgage was made. A bankruptcy court in Massachusetts, for example, has allowed a debtor to put on evidence as to whether she was entitled to rescind a note and mortgage based on incompetence. In re Hall, 188 B.R. 476 (Bankr. D. Mass. 1995). Unconscionability The common law contract defense of unconscionability may be applied to stop a foreclosure, when either the mortgage terms are unreasonable favorable to the lender or certain aspects of the transaction render it unconscionable. In re Maxwell, 281 B.R. 101 (Bankr. D. Mass. 2002); Hager v. American Gen. Fin. Inc., 37 F.Supp. 2d 778 (1999). For example, a Connecticut court found a second mortgage contract to be unconscionable based on the facts that: The defendant had limited knowledge of English, was uneducated and did not read very well The defendants financial situation made it apparent she could not reasonably expect to repay the mortgage At the closing, the defendant was not represented by an attorney and was rushed by plaintiffs attorney to sign the loan document The defendant was not informed until the last minute that, as a condition of credit, she was required to pay one years interest in advance And there was an absence of meaningful choice on the part of the defendant. In addition, the court found that the contract was substantively unconscionable, because it contained a large balloon payment that the borrower had no means of paying, and that the
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borrower had no reasonable opportunity to understand the terms of the contract. Family Fin. Servc. V. Pencer, 677 A.2d 479, (Conn. Ct. App. 1996); Emigrant Mortg., Co., Inc., v. DAngostino, 896 A.2d 814 (Conn. App. Ct. 2006). Invalid Security Instruments If the mortgage (or the deed of trust) is not a legally enforceable instrument then there can be no valid foreclosure. In re Hudson, 642 S.E. 2d 485 (N.C. Ct. App. 2007). A deed or mortgage that is forged is presumptively invalid. Ex Parte Floyd, 796 So. 2d 303 (Ala. 2001). As a result, forgery of a mortgage is generally an absolute defense to foreclosure. Similarly, where a deed has been forged and the new title holder then encumbers the property, courts have held both the deed and the mortgages are null. Flagstar v. Gibbons, 367 Ark. 225 (2006). The validity of security instruments in some community property states may require both spouses to execute instruments encumbering a homestead. For example, under Wisconsin law, a court found that a mortgage on a married couples homestead that was not signed by both spouses was void as to both spouses, regardless of their respective ownership interests. In re Larson, 346 B.R. 486 (Bankr. E.D. Wis. 2006). The failure to follow the formal requisites in acknowledging deeds and mortgages may also result in a void instrument. Many deed and mortgage fraud cases involve situations in which the person whom the notary certified as having appeared did not, in fact, appear. In re Fisher, 320 B.R. 52 (E.D. Pa. 2005). In fraudulent mortgage cases, borrowers are often instructed to sign a stack of documents that are then taken elsewhere for notarization. Goldone Credit Corp. v. Hardy, 503 So. 2d 1227 (Ala. Civ. App. 1987). Alternatively, improper notarization may result from the taking of an actual acknowledgment from an imposter, incompetent person, or over the telephone. Regardless, of the reason for the defective acknowledgment, practitioners should investigate whether such defects may render the instrument invalid. Breach of Fiduciary Duty - Reid v. Key Bank, 821 F.2d 9, 18 (1st Cir. 1987). Traditionally, a credit transaction has been considered an arms length transaction in which there has been no special duty read into the creditor-debtor relationship. Most courts, however, have held that the presence of certain factors in the creditor-debtor relationship may give rise to a fiduciary duty. Borrower can allege a cause of action for breach of fiduciary duty, if they can prove that they relied upon the lender's superior position and skills and placed their trust and confidence in the lender to act in a fair and reasonable manner for their best interests. For this to be a valid cause of action borrower must also show that they had a confidential relationship with the lender. The essential element of a confidential relationship is there be actual placing of trust or confidence in fact, by one party in another and a great disparity of position and influence between the parties to the relation. Such a duty of confidence arguably can arise if a lender acts in the role of advisor and knows or should have known the borrower tested
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him. When such a relationship exists it creates a duty to disclose. A plaintiff bears a heavy burden in establishing such a relation. A creditor-debtor relationship, by itself, does not create a fiduciary duty. Such a relationship may be created, however, by circumstances such as a diminished emotional or physical capacity or of the letting down of all guards and bars that defines disparity of position in the context of a confidential relation. If established, the existence of a fiduciary duty gives rise to a duty of fair and honest disclosure of all facts which might be presumed to influence the consumer to act. Barrett v. Bank of Am. 229 Cal. Rptr. 16 (Ct. App. 1986). When there is a duty to disclose, failure to do so should give rise to a tort cause of action for nondisclosure, or the silence may be deemed a misrepresentation. Such claims can be used to invalidate the underlying mortgage transaction or to recover money damages to offset any delinquency. Duty to Maximize Net Present Value - CA Civil Code 2923.6 The Legislature has found and declared that any duty servicers may have to maximize net present value under their pooling and servicing agreements, is owed to all parties in a loan pool, not to any particular parties, and that a servicer acts in the best interests of all parties if it agrees to or implements a loan modification or workout plan for which both of the following apply: The loan is in payment default or payment default is reasonably foreseeable Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis
Special Circumstances for Elder Homeowners Elder homeowners, are particularly vulnerable to, and often targets of, unfair lending practices. Many lived in their homes for decades, have paid down their mortgages, and have accumulated substantial equity in their homes. Elder homeowners may stand to lose their homes as a result of two types of misconduct: reverse mortgage abuse and exploitation by family members. Reverse Mortgage Abuse Reverse mortgages are rising debt loans made to elder homeowners which are secured by equity in the home. Repayment of a reverse mortgage loan is generally not required until certain events occur, such as the homeowners death or sale of the home. Typically reverse mortgage loans are paid out to the homeowner in monthly installments. The amount of the monthly proceeds received by the homeowner is determined by the value of the home, the interest rate and other fees charged, the loan term, the amount of any initial lump sum disbursed to the homeowner, and the homeowners age. Reverse mortgages are subject to some additional disclosure requirements under the federal Truth in Lending Act, 15 U.S.C. 1648; 12 C.F.R. 226.33, such as payment disclosures which reflect that a single payment is due when one of the specified events
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occurs. A number of states have also enacted laws designed to protect against abuse in reverse mortgages. These protections include: Limits on Liability limitation of the burrowers or the estates liability to the lesser of the proceeds of the sale of the home or the amount of the debt, as well as prohibition of prepayment penalties. Mont. Code Ann. 90-6-506(5); N.C. Gen. Stat. 53-257(6). Disclosure Requirements Full disclosure of costs, fees, and terms of reverse mortgages is required. Colo. Rev. Stat. 11-38-109; 205 Ill. Comp. Stat. 5. Protection from Default Homeowners are protected from being considered in default for temporary absences from the home, such as a temporary stay in a nursing home. 205 Ill. Comp. Stat. 5; Mont. Code Ann. 11-38-107(2). Minimum Time Requirements Between Loan Maturity and Default After the loan matures, as a result of either the death of the borrower or the borrowers default of an obligation under the contract, a reasonable time must be allowed for the borrower or the estate to arrange for repayment. N.C. Gen. Stat. 53268. Required Counseling Counseling by a third party is a precondition to receipt of a reverse mortgage under many reverse mortgage programs and some state laws. Minn. Stat. 47.58(8); Mont. Code Ann. 90-5-503; N.C. Gen. Stat. 53-270(6).
Exploitation by Family Members Exploitation by family members can take many forms. For example, an elder parent trying to help younger son make a down payment on a new home, mortgages her home to lend the money to the son, which the son never repays and the mother is not able to pay, forcing a foreclosure. A child convinces elder parent to give the child ownership of the home, the child then mortgages the property to pay their own debts and defaults on the mortgage on the parents property. An elder parent cosigns a loan for a child with bad credit, pledging their home as collateral. When the child fails to repay the loan, the bank threatens to foreclose on the parents home. If the borrower believes that there has been some elder homeowner abuse, they should consider the following questions. Does the elder homeowner have a cause of action against the relative for fraud, duress, or undue influence? o Is the elder willing to assert the claim Did the lender participate in the relatives fraud or did the lender acquiesce in the fraud? Did the transaction occur when the elder was incapacitated? Was there any forgery involved? There is a growing trend that statutes provide for increased penalties when the fraud is targeted at elders. Arkansas, California, Florida, Georgia, Illinois, Iowa, Minnesota, Nevada, and Wisconsin already allow for such increased damages. Ark. Code Ann. 4-
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88-101; Cal. Bub. & Prof. Code 17206; Cal. Civ. Code 1750; Fla. Stat. 501.2077; Ga. Code Ann. 10-1-390; 815 Ill. Comp. Stat. 505; Iowa Code 714.16A; Minn. Stat. 325F.71(b); Nev. Rev. Stat. 598.0973; Wis. Stat. 100.264.
Property Flipping Property flipping scams typically involve speculators who buy dilapidated residential properties at low prices and resell them at huge markups to unsophisticated first time home buyers. Often these flipping schemes are targeted at low or moderate-income racial minorities. Buyers are often persuaded to enter into purchase agreements only after the seller has promised to make necessary or agreed upon repairs to the property. When the closing date arrives, however, the seller has made few, if any, of the repairs. Once at the closing table, buyers are threatened with the loss of their earnest money deposit and the opportunity to be a homeowner if they do not complete the transaction. The end result if that the buyer has purchased property in questionable condition and is saddled with a debt loan that exceeds the market value of the property. These homeowners will be unable to resell the home in an arms-length transaction because the mortgage indebtedness exceeds the fair market value of the property. Ultimately, the homeowner will loose their homes due to foreclosure sales because the homes condition is much worse than represented, promised repairs are not performed, and the consumers mortgage payments may be higher than the consumer can afford. Sellers, appraisers and mortgage brokers frequently conspire to mislead the buyer as to the propertys market value, the condition of the property, and the mortgage financing terms. Commonly, fraudulent documents and bogus appraisals are used to secure a loan for the inflated purchase price. Lenders may also actively participate in the flipping scheme, particularly when the loans are insured by the federal government. M&T Mortg. Corp. v. Miller, 323 F. Supp. 2d 405 (E.D.N.Y. 2004). Actual damages in property flipping cases can be significant. Vaughn v. Consumer Home Mortg. 293 F. Supp. 2d 206 (E.D.N.Y. 2003). Generally, if the homebuyer has lost the home in a foreclosure, all monies spent by the homeowner, for moving in and out, for inspections, repairs, and all payments on the mortgage should be recoverable. Hoffman v. Stamper, 843 A.2d 153 (Md. Ct. Spec. App. 2003). If the homebuyer has been able to keep the home, actual damages may include monies spent on repairs, the difference between the appraised value and the actual value, and the excess mortgage payments, calculated based on the difference between the monthly payments assuming the true value of the home and the actual monthly payments using the inflated appraised valuations. Posner v. Davis, 395 N.E. 2d 133 (Ill. App. Ct. 1979). Where recoverable, a claim for emotional distress should also be developed. Appraiser Liability While sellers are obvious defendants in property flipping schemes, appraisers, with whom consumers may have has little contact, are essential to the scam. Bird v. Delacruz, 411 F. Supp. 2d 891 (S.D. Ohio 2005). An inflated appraisal is the linchpin of these transactions. United States v. Owens, 301 F.3d 521 (6th Cir. 2002). As a result,
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advocates should carefully examine the appraisal and investigate the appraiser in these cases. Inflated values are typically achieved by misrepresenting the condition of the property or by comparing sales that are not really comparable. Appraisals in sub-prime transactions may be inflated over 1000% above the actual fair market value in order to create a loan to value ratio of between 60% and 75% to satisfy the underwriting requirements of the lender and secondary market. Federal Housing Administration appraisals typically are inflated by 30% to 50% because FHA-insured loans are made at close to 100% of the appraised value. There can be little question that the preparation of a falsified appraisal is misrepresentation that will support a fraud claim and falls within the scope of most state UDAP statutes. UDAP claims may be particularly promising since in most states the consumer does not have to show reliance, privity of contracts is unnecessary, and nondisclosure is just as actionable as affirmative deception. Appraisers may also be liable for fraudulent concealment, civil conspiracy and civil RICO violations, and violations of state licensing laws. Adcock v. Brakegate, Ltd., 164 Ill. 2d 54, 645 N.E.2d 888 (1994). Lender Liability While the ultimate holder of the mortgage loan may stand to lose in these property flipping schemes (except to the extent the loan is federally insured), loan originators can stand to make significant profits on these transactions. As a result, lenders may also engage in fraudulent conduct in documenting and underwriting the loan. Consumer Prot. Div. v. Morgan, 874 A. 2d 919 (Md. 2005). Credit applications and down payments also are routinely falsified in both sub-prime and FHA-insured transactions. For example, in M&T Mortgage Corporations v. Miller, the plaintiffs alleged that the lender falsified and inflated their income level on the loan application to deceive HUD and FHA into believing that the loan was affordable. In another recent case, a loan officer assisted the seller to evade HUD requirements and then actively participate in defrauding the consumer. Hoffman v. Stamper, 385 Md. 1, 867 A.2d 276 (2005). Even where lenders do not participate in the scheme, lenders have often been indifferent to the incidence of property flipping in their portfolios. In addition to fraud, conspiracy, UDAP, and civil RICO claims, advocates should investigate potential claims for reverse redlining under federal discrimination laws and claims under the federal False Claims Act in cases where the lender or holder submits an insurance claim. Liability of Other Parties In addition to the seller, appraiser and lender, other parties may be liable for their participation in a flipping scheme. For example, building contractors what were hired to perform renovations, but who either did not do the work or misrepresented the extent of the work have been implicated. Polonetsky v. Better Homes Depot, Inc., 97 N.Y. 2d 46 (2001). Consumers have also sufficiently pleaded claims against mortgage brokers, closing attorneys, property inspectors, and title companies.
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Anti-Flipping Regulations In an attempt to curb the increasing number of property flipping schemes, the FHA recently implemented property flipping guidelines. These guidelines seek to hold lenders accountable for the quality of appraisals on properties secured by FHA-insured mortgages. The final rule requires that: Only owners of record can sell properties that will be financed using FHA-insured mortgages (the transaction may not involve any sale or assignment of the sales contract); Any re-sale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; For re-sale of a property may not occur 91-180 days where the new sales price exceeds the previous sales price by 100%, FHA will require additional documentation validating the propertys value. 24 C.F.R. 203.37a. The 90 day no flip prohibition is waived when the sellers of the property are: HUD itself, disposing of property in its REP portfolio; Sales of properties that were acquired by the seller through inheritance; Fannie Mae, Freddie Mac or other federally chartered financial institutions are disposing of REP; Local or state housing agencies; Nonprofit organizations that have previous approvals to purchase HUD REP properties at a discount; and Properties located in a presidentially declared disaster area, provided FHA has issued an announcement of eligibility.
In addition to the specific limitation set forth in the regulation, the rules provide flexibility for FHA to examine and require additional evidence for appraised value when properties are resold within 12 months. 24 C.F.R. 203.37a.
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Injunction Restricting Foreclosure of Abusive ARM Subprime Loans

Disclaimer: The law in this section is only controlling precedent in Massachusetts. However, it may be used as persuasive precedent in other jurisdictions. Courts are beginning to hear this and similar arguments in light of the current housing market situation. The case of Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733 (2008). was recently decided. In this case the court found that a loan was presumptively unfair if it met certain characteristics. The court allowed the borrower to obtain a preliminary injunction against the lender to stop a foreclosure sale once they made a sufficient showing of evidence to prove that all 4 of the characteristics were present in their loan. The court held that a borrower can obtain a preliminary injunction if the mortgage loan was presumptively unfair. A mortgage loan will be deemed to be presumptively unfair if it contains four characteristics. These four characteristics must be shown through evidence in order for the judge to grant the preliminary injunction. Adjustable rates with an introductory period of three years or less; A teaser rate at least 3% lower than the fully indexed rate; The borrower has a debt to income ratio that would exceed 50% if the debt were measured under the fully indexed rate (and not the teaser rate); and The loan to value ratio of the loan is 100% or the loan carries a substantial prepayment penalty or the loan carries a prepayment penalty that extends beyond the introductory rate period.
If all four of these characteristics are in a loan, the borrower will be able to stop any foreclosure action that the lender attempts to initiate. The court held that the lender knew or should have known that loans with the four characteristics were doomed to foreclose if housing prices declined. Therefore making these loans likely amounted to an unfair practice prohibited by the state UDAP statute, even without evidence of deception or concealment. It is not clear how far this argument can be taken and what happens once the foreclosure sale is injoined, but if nothing else, the preliminary injunction can halt a foreclosure sale and allow the borrower a chance for their case to be heard against the lender.
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226.18
may be required under paragraph (f) of this section, 226.19, or 226.20. (f) Early disclosures. If disclosures required by this subpart are given before the date of consummation of a transaction and a subsequent event makes them inaccurate, the creditor shall disclose before consummation:39 (1) Any changed term unless the term was based on an estimate in accordance with 226.17(c)(2) and was labelled an estimate; (2) All changed terms, if the annual percentage rate at the time of consummation varies from the annual percentage rate disclosed earlier by more than 18 of 1 percentage point in a regular transaction, or more than 14 of 1 percentage point in an irregular transaction, as defined in 226.22(a). (g) Mail or telephone ordersdelay in disclosures. If a creditor receives a purchase order or a request for an extension of credit by mail, telephone, or facsimile machine without face-to-face or direct telephone solicitation, the creditor may delay the disclosures until the due date of the first payment, if the following information for representative amounts or ranges of credit is made available in written form or in electronic form to the consumer or to the public before the actual purchase order or request: (1) The cash price or the principal loan amount. (2) The total sale price. (3) The finance charge. (4) The annual percentage rate, and if the rate may increase after consummation, the following disclosures: (i) The circumstances under which the rate may increase. (ii) Any limitations on the increase. (iii) The effect of an increase. (5) The terms of repayment. (h) Series of salesdelay in disclosures. If a credit sale is one of a series made under an agreement providing that subsequent sales may be added to an outstanding balance, the creditor may delay the required disclosures until the due date of the first payment for the current sale, if the following two conditions are met:
39 For certain residential mortgage transactions, 226.19(a)(2) permits redisclosure no later than consummation or settlement, whichever is later.
12 CFR Ch. II (1108 Edition)

(1) The consumer has approved in writing the annual percentage rate or rates, the range of balances to which they apply, and the method of treating any unearned finance charge on an existing balance. (2) The creditor retains no security interest in any property after the creditor has received payments equal to the cash price and any finance charge attributable to the sale of that property. For purposes of this provision, in the case of items purchased on different dates, the first purchased is deemed the first item paid for; in the case of items purchased on the same date, the lowest priced is deemed the first item paid for. (i) Interim student credit extensions. For each transaction involving an interim credit extension under a student credit program, the creditor need not make the following disclosures: the finance charge under 226.18(d), the payment schedule under 226.18(g), the total of payments under 226.18(h), or the total sale price under 226.18(j).
[Reg. Z, 46 FR 20892, Apr. 7, 1981, as amended at 52 FR 48670, Dec. 24, 1987; 61 FR 49246, Sept. 19, 1996; 66 FR 17338, Mar. 30, 2001; 67 FR 16982, Apr. 9, 2002; 72 FR 63474, Nov. 9, 2007]
226.18 Content of disclosures. For each transaction, the creditor shall disclose the following information as applicable: (a) Creditor. The identity of the creditor making the disclosures. (b) Amount financed. The amount financed, using that term, and a brief description such as the amount of credit provided to you or on your behalf. The amount financed is calculated by: (1) Determining the principal loan amount or the cash price (subtracting any downpayment); (2) Adding any other amounts that are financed by the creditor and are not part of the finance charge; and (3) Subtracting any prepaid finance charge. (c) Itemization of amount financed. (1) A separate written itemization of the amount financed, including:40
40 Good faith estimates of settlement costs provided for transactions subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) may be substituted for the disclosures required by paragraph (c) of this section.
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Federal Reserve System

(i) The amount of any proceeds distributed directly to the consumer. (ii) The amount credited to the consumers account with the creditor. (iii) Any amounts paid to other persons by the creditor on the consumers behalf. The creditor shall identify those persons.41 (iv) The prepaid finance charge. (2) The creditor need not comply with paragraph (c)(1) of this section if the creditor provides a statement that the consumer has the right to receive a written itemization of the amount financed, together with a space for the consumer to indicate whether it is desired, and the consumer does not request it. (d) Finance charge. The finance charge, using that term, and a brief description such as the dollar amount the credit will cost you. (1) Mortgage loans. In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge: (i) Is understated by no more than $100; or (ii) Is greater than the amount required to be disclosed. (2) Other credit. In any other transaction, the amount disclosed as the finance charge shall be treated as accurate if, in a transaction involving an amount financed of $1,000 or less, it is not more than $5 above or below the amount required to be disclosed; or, in a transaction involving an amount financed of more than $1,000, it is not more than $10 above or below the amount required to be disclosed. (e) Annual percentage rate. The annual percentage rate, using that term, and a brief description such as the cost of your credit as a yearly rate. 42
41 The following payees may be described using generic or other general terms and need not be further identified: public officials or government agencies, credit reporting agencies, appraisers, and insurance companies. 42 For any transaction involving a finance charge of $5 or less on an amount financed of $75 or less, or a finance charge of $7.50 or less
226.18
(f) Variable rate. (1) If the annual percentage rate may increase after consummation in a transaction not secured by the consumers principal dwelling or in a transaction secured by the consumers principal dwelling with a term of one year or less, the following disclosures:43 (i) The circumstances under which the rate may increase. (ii) Any limitations on the increase. (iii) The effect of an increase. (iv) An example of the payment terms that would result from an increase. (2) If the annual percentage rate may increase after consummation in a transaction secured by the consumers principal dwelling with a term greater than one year, the following disclosures: (i) The fact that the transaction contains a variable-rate feature. (ii) A statement that variable-rate disclosures have been provided earlier. (g) Payment schedule. The number, amounts, and timing of payments scheduled to repay the obligation. (1) In a demand obligation with no alternate maturity date, the creditor may comply with this paragraph by disclosing the due dates or payment periods of any scheduled interest payments for the first year. (2) In a transaction in which a series of payments varies because a finance charge is applied to the unpaid principal balance, the creditor may comply with this paragraph by disclosing the following information: (i) The dollar amounts of the largest and smallest payments in the series. (ii) A reference to the variations in the other payments in the series. (h) Total of payments. The total of payments, using that term, and a descriptive explanation such as the amount
on an amount financed of more than $75, the creditor need not disclose the annual percentage rate. 43 Information provided in accordance with 226.18(f)(2) and 226.19(b) may be substituted for the disclosures required by paragraph (f)(1) of this section.
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226.19
you will have paid when you have made all scheduled payments. 44 (i) Demand feature. If the obligation has a demand feature, that fact shall be disclosed. When the disclosures are based on an assumed maturity of 1 year as provided in 226.17(c)(5), that fact shall also be disclosed. (j) Total sale price. In a credit sale, the total sale price, using that term, and a descriptive explanation (including the amount of any downpayment) such as the total price of your purchase on credit, including your downpayment of $ll. The total sale price is the sum of the cash price, the items described in paragraph (b)(2), and the finance charge disclosed under paragraph (d) of this section. (k) Prepayment. (1) When an obligation includes a finance charge computed from time to time by application of a rate to the unpaid principal balance, a statement indicating whether or not a penalty may be imposed if the obligation is prepaid in full. (2) When an obligation includes a finance charge other than the finance charge described in paragraph (k)(1) of this section, a statement indicating whether or not the consumer is entitled to a rebate of any finance charge if the obligation is prepaid in full. (l) Late payment. Any dollar or percentage charge that may be imposed before maturity due to a late payment, other than a deferral or extension charge. (m) Security interest. The fact that the creditor has or will acquire a security interest in the property purchased as part of the transaction, or in other property identified by item or type. (n) Insurance and debt cancellation. The items required by 226.4(d) in order to exclude certain insurance premiums and debt cancellation fees from the finance charge. (o) Certain security interest charges. The disclosures required by 226.4(e) in order to exclude from the finance charge certain fees prescribed by law or certain premiums for insurance in lieu of perfecting a security interest.
44 In any transaction involving a single payment, the creditor need not disclose the total of payments.
12 CFR Ch. II (1108 Edition)

(p) Contract reference. A statement that the consumer should refer to the appropriate contract document for information about nonpayment, default, the right to accelerate the maturity of the obligation, and prepayment rebates and penalties. At the creditors option, the statement may also include a reference to the contract for further information about security interests and, in a residential mortgage transaction, about the creditors policy regarding assumption of the obligation. (q) Assumption policy. In a residential mortgage transaction, a statement whether or not a subsequent purchaser of the dwelling from the consumer may be permitted to assume the remaining obligation on its original terms. (r) Required deposit. If the creditor requires the consumer to maintain a deposit as a condition of the specific transaction, a statement that the annual percentage rate does not reflect the effect of the required deposit.45
[46 FR 20892, Apr. 7, 1981; 46 FR 29246, June 1, 1981, as amended at 52 FR 48670, Dec. 24, 1987; 61 FR 49246, Sept. 19, 1996]
226.19 Certain residential mortgage and variable-rate transactions. (a) Residential mortgage transactions subject to RESPA(1) Time of disclosures. In a residential mortgage transaction subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) the creditor shall make good faith estimates of the disclosures required by 226.18 before consummation, or shall deliver or place them in the mail not later than three business days after the creditor receives the consumers written application, whichever is earlier. (2) Redisclosure required. If the annual percentage rate at the time of consummation varies from the annual percentage rate disclosed earlier by more than 18 of 1 percentage point in a regular transaction or more than 14 of 1 percentage point in an irregular transaction, as defined in 226.22, the creditor shall disclose all the changed
45 A required deposit need not include, for example: (1) An escrow account for items such as taxes, insurance or repairs; (2) a deposit that earns not less than 5 percent per year; or (3) payments under a Morris Plan.
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[Code of Federal Regulations] [Title 24, Volume 5] [Revised as of April 1, 2001] From the U.S. Government Printing Office via GPO Access [CITE: 24CFR3500.7] [Page 255-256] TITLE 24--HOUSING AND URBAN DEVELOPMENT CHAPTER XX--OFFICE OF ASSISTANT SECRETARY FOR HOUSING--FEDERAL HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PART 3500--REAL ESTATE SETTLEMENT PROCEDURES ACT--Table of Contents Sec. 3500.7 Good faith estimate.
(a) Lender to provide. Except as provided in this paragraph (a) or paragraph (f) of this section, the lender shall provide all applicants for a federally related mortgage loan with a good faith estimate of the amount of or range of charges for the specific settlement services the borrower is likely to incur in connection with the settlement. The lender shall provide the good faith estimate required under this section (a suggested format is set forth in appendix C of this part) either by delivering the good faith estimate or by placing it in the mail to the loan applicant, not later than three business days after the application is received or prepared. (1) If the lender denies the application for a federally related mortgage loan before the end of the three-business-day period, the lender need not provide the denied borrower with a good faith estimate. (2) For ``no cost'' or ``no point'' loans, the charges to be shown on the good faith estimate include any payments to be made to affiliated or independent settlement service providers. These payments should be shown as P.O.C. (Paid Outside of Closing) on the Good Faith Estimate and the HUD-1 or HUD-1A. (3) In the case of dealer loans, the lender is responsible for provision of the good faith estimate, either directly or by the dealer. (4) If a mortgage broker is the exclusive agent of the lender, either the lender or the mortgage broker shall provide the good faith estimate within three business days after the mortgage broker receives or prepares the application. (b) Mortgage broker to provide. In the event an application is received by a mortgage broker who is not an exclusive agent of the lender, the mortgage broker must provide a good faith estimate within three days of receiving a loan application based on his or her knowledge of the range of costs (a suggested format is set forth in appendix C of this part). As long as the mortgage broker has provided the good faith estimate, the funding lender is not required to provide an additional good faith estimate, but the funding lender is responsible for ascertaining that the good faith estimate has been delivered. If the application for mortgage credit is denied before the end of the threebusiness-day period, the mortgage broker need not provide the denied borrower with a good faith estimate. (c) Content of good faith estimate. A good faith estimate consists of an estimate, as a dollar amount or range, of each charge which: (1) Will be listed in section L of the HUD-1 or HUD-1A in accordance with the instructions set forth in appendix A to this part; and (2) That the borrower will normally pay or incur at or before settlement based upon common practice in the locality of the mortgaged property. Each such estimate must be made in good faith and bear a
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reasonable relationship to the charge a borrower is likely to be required to pay at settlement, and must be based upon experience in the locality of the mortgaged property. As to each charge with respect to which the lender requires a particular settlement service provider to be used, the lender shall make its estimate based upon the lender's knowledge of the amounts charged by such provider. (d) Form of good faith estimate. A suggested good faith estimate form is set forth in appendix C to this part and is in compliance with the requirements of the Act except for any additional requirements of paragraph (e) of this section. The good faith estimate may be [[Page 256]] provided together with disclosures required by the Truth in Lending Act, 15 U.S.C. 1601 et seq., so long as all required material for the good faith estimate is grouped together. The lender may include additional relevant information, such as the name/signature of the applicant and loan officer, date, and information identifying the loan application and property, as long as the form remains clear and concise and the additional information is not more prominent than the required material. (e) Particular providers required by lender. (1) If the lender requires the use (see Sec. 3500.2, ``required use'') of a particular provider of a settlement service, other than the lender's own employees, and also requires the borrower to pay any portion of the cost of such service, then the good faith estimate must: (i) Clearly state that use of the particular provider is required and that the estimate is based on the charges of the designated provider; (ii) Give the name, address, and telephone number of each provider; and (iii) Describe the nature of any relationship between each such provider and the lender. Plain English references to the relationship should be utilized, e.g., ``X is a depositor of the lender,'' ``X is a borrower from the lender,'' ``X has performed 60% of the lender's settlements in the past year.'' (The lender is not required to keep detailed records of the percentages of use. Similar language, such as ``X was used [regularly] [frequently] in our settlements the past year'' is also sufficient for the purposes of this paragraph.) In the event that more than one relationship exists, each should be disclosed. (2) For purposes of paragraph (e)(1) of this section, a ``relationship'' exists if: (i) The provider is an associate of the lender, as that term is defined in 12 U.S.C. 2602(8); (ii) Within the last 12 months, the provider has maintained an account with the lender or had an outstanding loan or credit arrangement with the lender; or (iii) The lender has repeatedly used or required borrowers to use the services of the provider within the last 12 months. (3) Except for a provider that is the lender's chosen attorney, credit reporting agency, or appraiser, if the lender is in an affiliated business relationship (see Sec. 3500.15) with a provider, the lender may not require the use of that provider. (4) If the lender maintains a controlled list of required providers (five or more for each discrete service) or relies on a list maintained by others, and at the time of application the lender has not yet decided which provider will be selected from that list, then the lender may satisfy the requirements of this section if the lender: (i) Provides the borrower with a written statement that the lender will require a particular provider from a lender-controlled or -approved list; and
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(ii) Provides the borrower in the Good Faith Estimate the range of costs for the required provider(s), and provides the name of the specific provider and the actual cost on the HUD-1 or HUD-1A. (f) Open-end lines of credit (home-equity plans) under Truth in Lending Act. In the case of a federally related mortgage loan involving an open-end line of credit (home-equity plan) covered under the Truth in Lending Act and Regulation Z, a lender or mortgage broker that provides the borrower with the disclosures required by 12 CFR 226.5b of Regulation Z at the time the borrower applies for such loan shall be deemed to satisfy the requirements of this section. (Approved by the Office of Management and Budget under control number 2502-0265) [61 FR 13233, Mar. 26, 1996, as amended at 61 FR 58476, Nov. 15, 1996]
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CHAPTER 64 AN ACT prohibiting certain abusive lending practices and supplementing Title 46 of the Revised Statutes. BE IT ENACTED by the Senate and General Assembly of the State of New Jersey: C.46:10B-22 Short title. 1. This act shall be known and may be cited as the "New Jersey Home Ownership Security Act of 2002." C.46:10B-23 Findings, declarations relative to abusive lending practices. 2. The Legislature finds and declares that: a. Abusive mortgage lending has become an increasing problem in this State, exacerbating the loss of equity in homes and causing an increase in the number of foreclosures in recent years. One of the most common forms of abusive lending is the making of loans that are equity-based, rather than income-based. The financing of points and fees in these loans provides immediate income to the originator and encourages the repeated refinancing of home loans. The lender's ability to sell loans reduces the incentive to ensure that the homeowner can afford the payments of the loan. As long as there is sufficient equity in the home, an abusive lender benefits even if the borrower is unable to make the payments and is forced to refinance. In addition, the financing of high points and fees causes the loss of precious equity in each refinancing and often leads to foreclosure. b. Abusive lending has threatened the viability of many communities and caused decreases in home ownership. While the marketplace appears to operate effectively for conventional mortgages, too many homeowners find themselves victims of overreaching lenders who provide loans with unnecessarily high costs and terms that are unnecessary to secure repayment of the loan. c. As competition and self-regulation have not eliminated the abusive terms from loans secured by a consumer's home, the consumer protection provisions of this act are necessary to encourage lending at reasonable rates with reasonable terms. C.46:10B-24 Definitions relative to abusive lending practices. 3. As used in this act: "Affiliate" means any company that controls, is controlled by, or is under the common control with any company, as set forth in 12 U.S.C. s.1841 et seq. "Bona fide discount points" means loan discount points which are: (1) Knowingly paid by the borrower; (2) Paid for the express purpose of reducing, and which result in a reduction of, the interest rate or time-price differential applicable to the loan; (3) In fact reducing the interest rate or time-price differential applicable to the loan from an interest rate which does not exceed the conventional mortgage rate for a home loan secured by a first lien, by more than two percentage points, or for a home loan secured by a junior lien, by more than three and one half percentage points; and (4) Recouped within the first five years of the scheduled loan payments. Loan discount points will be considered to be recouped within the first five years of the scheduled loan payments if the reduction in the interest rate that is achieved by the payment of the loan discount points reduces the interest charged on the scheduled payments such that the borrower's dollar amount of savings in interest over the first five years is equal to or exceeds the dollar amount of loan discount points paid by the borrower. "Borrower" means any natural person obligated to repay the loan, including a coborrower, cosigner, or guarantor. "Commissioner" means the Commissioner of Banking and Insurance. "Conventional mortgage rate" means the most recently published annual yield on conventional mortgages published by the Board of Governors of the Federal Reserve System, as published in Statistical Release H.15 or any publication that may supersede it, as of the applicable time set forth in 12 C.F.R. 226.32(a)(1)(I). "Conventional prepayment penalty" means any prepayment penalty or fee that may be collected or charged in a home loan, and that is authorized by law other than by this act,
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P.L. 2003, CHAPTER 64 2 provided the home loan (1) does not have an annual percentage rate that exceeds the conventional mortgage rate by more than two percentage points; and (2) does not permit any prepayment fees or penalties that exceed two percent of the amount prepaid. "Covered home loan" means a home loan in which: (1) The total points and fees payable in connection with the loan, excluding either a conventional prepayment penalty or not more than two bona fide discount points, exceed 4 percent of the total loan amount, or 4.5 percent of the total loan amount if the total loan amount is $40,000 or less, and 4.5 percent of the total loan amount if the loan is insured by the Federal Housing Administration or guaranteed by the federal Department of Veterans Affairs; or (2) The home loan is such that it is considered a high-cost home loan under this act. "Creditor" means a person who extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments, and to whom the obligation is payable at any time. Creditor shall also mean any person brokering a home loan, which shall include any person who directly or indirectly solicits, processes, places, or negotiates home loans for others or who closes home loans which may be in the person's own name with funds provided by others and which loans are thereafter assigned to the person providing the funding of such loans, provided that creditor shall not include a person who is an attorney providing legal services to the borrower or a person or entity holding an individual or organization insurance producer license in the line of title insurance or a title insurance company, as defined by subsection c. of section 1 of P.L.1975, c.106 (C.17:46B-1), or any officer, director or employee thereof, providing services in the closing of a home loan who is not also funding the home loan and is not an affiliate of the creditor or an assignee that is subject to the provisions of section 6 of this act. "Department" means the Department of Banking and Insurance. "High-cost home loan" means a home loan for which the principal amount of the loan does not exceed $350,000, which amount shall be adjusted annually to include the last published increase of the housing component of the national Consumer Price Index, New YorkNortheastern New Jersey Region, in which the terms of the loan meet or exceed one or more of the thresholds as defined in this section. "Home loan" means an extension of credit primarily for personal, family or household purposes, including an open-end credit plan, other than a reverse mortgage transaction, in which the loan is secured by: (1) A mortgage or deed of trust on real estate in this State upon which there is located or there is to be located a one to six family dwelling which is or will be occupied by a borrower as the borrower's principal dwelling; or (2) A security interest in a manufactured home which is or will be occupied by a borrower as the borrower's principal dwelling. "Manufactured home" means a structure, transportable in one or more sections, which in the traveling mode is eight body feet or more in width or 40 body feet or more in length or, when erected on site is 320 or more square feet and which is built on a permanent chassis and designed to be used as a dwelling with a permanent foundation when erected on land secured in conjunction with the real property on which the manufactured home is located and connected to the required utilities and includes the plumbing, heating, air-conditioning and electrical systems contained therein; except that such term shall include any structure which meets all the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the Secretary of the United States Department of Housing and Urban Development and complies with the standards established under the federal National Manufactured Housing Construction and Safety Standards Act of 1974, 42 U.S.C. s.5401 et seq. Such term does not include rental property or second homes or manufactured homes when not secured in conjunction with the real property on which the manufactured home is located. "Points and fees" means: (1) All items listed in 15 U.S.C. s.1605(a)(1) through (4), except interest or the time-price differential; (2) All charges listed in 15 U.S.C. s.1605(e);
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P.L. 2003, CHAPTER 64 3 (3) All compensation paid directly or indirectly to a mortgage broker, including a broker that originates a loan in its own name in a table-funded transaction; (4) The cost of all premiums financed by the creditor, directly or indirectly for any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments financed by the creditor directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums calculated and paid on a monthly basis shall not be considered financed by the creditor; (5) The maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents; (6) All prepayment fees or penalties that are incurred by the borrower if the loan refinances a previous loan made or currently held by the same creditor or an affiliate of the creditor; and (7) For open-end loans, the points and fees are calculated by adding the total points and fees known at or before closing, including the maximum prepayment penalties which may be charged or collected under the terms of the loan documents if prepayment penalties are authorized by law other than by this act, plus the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line. "Points and fees" shall not include the following items: title insurance premiums and fees, charges and premiums paid to a person or entity holding an individual or organization insurance producer license in the line of title insurance or a title insurance company, as defined by subsection c. of section 1 of P.L.1975, c.106 (C.17:46B-1);taxes, filing fees, and recording and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest; and reasonable fees paid to a person other than a creditor or an affiliate of the creditor or to the mortgage broker or an affiliate of the mortgage broker for the following, provided that the conditions in 12 C.F.R. s.226.4(c)(7) are met: fees for tax payment services; fees for flood certification; fees for pest infestation and flood determinations; appraisal fees; fees for inspections performed prior to closing; fees for credit reports; fees for surveys; attorneys' fees; notary fees; escrow charges; and fire and flood insurance premiums, provided that the conditions in 12 C.F.R. s.226.4(d)(2) are met. "Rate" means that annual percentage rate for the loan calculated at closing based on the points and fees set forth in this act and according to the provisions of 15 U.S.C. s. 1601 et seq. and the regulations promulgated thereunder by the Federal Reserve Board. "Threshold" means any one of the following two items, as defined: (1) "Rate threshold" means the annual percentage rate of the loan at the time the loan is consummated such that the loan is considered a "mortgage" under section 152 of the federal "Home Ownership and Equity Protection Act of 1994," Pub.L. 103-325 (15 U.S.C. s.1602(aa)), and the regulations promulgated by the Federal Reserve Board, including 12 C.F.R. s.226.32, without regard to whether the loan transaction is or may be a "residential mortgage transaction," as defined in 12 C.F.R. s.226.2(a)(24). (2) "Total points and fees threshold" means that the total points and fees payable by the borrower at or before the loan closing, excluding either a conventional prepayment penalty or up to two bona fide discount points, exceed: (a) 5% of the total loan amount if the total loan amount is $40,000 or more; or (b) the lesser of 6%of the total loan amount or $1,000, if the total loan amount is less than $20,000, and 6% if the total loan amount is $20,000 or more but less than $40,000. "Total loan amount" means the principal of the loan minus those points and fees as defined in this section that are included in the principal amount of the loan. For open-end loans, the total loan amount shall be calculated using the total line of credit allowed under the home loan. C.46:10B-25 Creditors, prohibited practices relative to home loans. 4. a. No creditor making a home loan shall finance, directly or indirectly, any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis shall not be considered financed by the creditor. b. No creditor shall engage in the unfair act or practice of "flipping" a home loan.
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P.L. 2003, CHAPTER 64 4 "Flipping" occurs when a creditor makes a covered home loan to a borrower that refinances an existing home loan that was consummated within the prior 60 months when the new loan does not have reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the economic and noneconomic circumstances, the purpose of the loan, the cost of the new loan, and the borrower's circumstances. In addition, the following home loan refinancings shall be presumed to be flipping if: (1) The primary tangible benefit to the borrower is an interest rate lower than the interest rate on a debt satisfied or refinanced in connection with the home loan, and it will take more than four years for the borrower to recoup the costs of the points and fees and other closing costs through savings resulting from the lower interest rate; or (2) The new loan refinances an existing home loan that is a special mortgage originated, subsidized, or guaranteed by or through a state, tribal or local government, or nonprofit organization, which either bears a below-market interest rate at the time the loan was originated, or has nonstandard payment terms beneficial to the borrower, such as payments that vary with income or are limited to a percentage of income, or where no payments are required under specified conditions, and where, as a result of refinancing, the borrower will lose one or more of the benefits of the special mortgage. Without limiting the foregoing, it is hereby declared that subsection b. of this section shall create no presumption that any home loan that is not a covered home loan or a high-cost home loan, and any refinancing outside the durational limits set forth above, is not unconscionable, and it is hereby further declared that subsection b. of this section shall create no presumption that any home loan that is not a covered home loan or a high-cost home loan, and any refinancing outside the durational limits set forth above, shall not constitute an unlawful practice under P.L.1960, c.39 (C.56:8-1 et seq.), based on factors including those set forth in subsection b. of this section alone or in conjunction with any other circumstances. c. No creditor shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a home loan that refinances all or any portion of that existing loan or debt. d. No creditor shall charge a late payment fee in relation to a home loan except according to the following rules: (1) The late payment fee may not be in excess of 5%of the amount of the payment past due. (2) The fee may only be assessed by a payment past due for 15 days or more. (3) The fee may not be charged more than once with respect to a single late payment. If a late payment fee is deducted from a payment made on the loan, and such deduction causes a subsequent default on a subsequent payment, no late payment fee may be imposed for such default. If a late payment fee has been once imposed with respect to a particular late payment, no such fee shall be imposed with respect to any future payment which would have been timely and sufficient, but for the previous default. (4) No fee shall be charged unless the creditor notifies the borrower within 45 days following the date the payment was due that a late payment fee has been imposed for a particular late payment. No late payment fee may be collected from any borrower if the borrower informs the creditor that nonpayment of an installment is in dispute and presents proof of payment within 45 days of receipt of the creditor's notice of the late fee. (5) The creditor shall treat each and every payment as posted on the same date as it was received by the creditor, servicer, creditor's agent, or at the address provided to the borrower by the creditor, servicer, or the creditor's agent for making payments. e. No home loan shall contain a provision that permits the creditor, in its sole discretion, to accelerate the indebtedness. This provision does not prohibit acceleration of the loan in good faith due to the borrower's failure to abide by the material terms of the loan. f. No creditor shall charge a fee for informing or transmitting to any person the balance due to pay off a home loan or to provide a release upon prepayment. Payoff balances shall be provided within seven business days after the request. C.46:10B-26 High-cost home loans, limitations, prohibited practices.
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P.L. 2003, CHAPTER 64 5 5. A high-cost home loan shall be subject to the following additional limitations and prohibited practices: a. No high-cost home loan shall contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments. This provision shall not apply when the payment schedule is adjusted to the seasonal or irregular income of the borrower. b. No high-cost home loan shall include payment terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of interest due. c. No high-cost home loan shall contain a provision that increases the interest rate after default. This provision shall not apply to interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan documents, provided the change in the interest rate is not triggered by the event of default or the acceleration of the indebtedness. d. No high-cost home loan shall include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower. e. Without regard to whether a borrower is acting individually or on behalf of others similarly situated, any provision of a high-cost home loan agreement that allows a party to require a borrower to assert any claim or defense in a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute than a judicial forum established in this State if the borrower may otherwise properly bring a claim or defense or limits in any way any claim or defense the borrower may have is unconscionable and void. f. A creditor shall not make a high-cost home loan unless the creditor has given the following notice, or substantially similar notice, in writing, to the borrower, acknowledged in writing and signed by the borrower not later than the time the notice is required under the notice provision contained in 12 C.F.R. s.226.31(c). NOTICE TO BORROWER YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLE TO OBTAIN A LOAN AT A LOWER COST. YOU SHOULD SHOP AROUND AND COMPARE LOAN RATES AND FEES. MORTGAGE LOAN RATES AND CLOSING COSTS AND FEES VARY BASED ON MANY FACTORS, INCLUDING YOUR PARTICULAR CREDIT AND FINANCIAL CIRCUMSTANCES, YOUR EMPLOYMENT HISTORY, THE LOAN-TO-VALUE REQUESTED AND THE TYPE OF PROPERTY THAT WILL SECURE YOUR LOAN. THE LOAN RATE AND FEES COULD ALSO VARY BASED ON WHICH CREDITOR OR BROKER YOU SELECT. IF YOU ACCEPT THE TERMS OF THIS LOAN, THE CREDITOR WILL HAVE A MORTGAGE LIEN ON YOUR HOME. YOU COULD LOSE YOUR HOME AND ANY MONEY YOU PUT INTO IT IF YOU DO NOT MEET YOUR PAYMENT OBLIGATIONS UNDER THE LOAN. YOU SHOULD CONSULT AN ATTORNEY-AT-LAW AND A QUALIFIED INDEPENDENT CREDIT COUNSELOR OR OTHER EXPERIENCED FINANCIAL ADVISOR REGARDING THE RATE, FEES AND PROVISIONS OF THIS MORTGAGE LOAN BEFORE YOU PROCEED. A LIST OF QUALIFIED COUNSELORS IS AVAILABLE BY CONTACTING THE NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE. YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THIS DISCLOSURE OR HAVE SIGNED A LOAN APPLICATION. REMEMBER, PROPERTY TAXES AND HOMEOWNER'S INSURANCE ARE YOUR RESPONSIBILITY. NOT ALL CREDITORS PROVIDE ESCROW SERVICES FOR THESE PAYMENTS. YOU SHOULD ASK YOUR CREDITOR ABOUT THESE SERVICES.
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P.L. 2003, CHAPTER 64 6 ALSO, YOUR PAYMENTS ON EXISTING DEBTS CONTRIBUTE TO YOUR CREDIT RATINGS. YOU SHOULD NOT ACCEPT ANY ADVICE TO IGNORE YOUR REGULAR PAYMENTS TO YOUR EXISTING CREDITORS. g. A creditor shall not make a high-cost home loan to a borrower who finances points and fees in connection with a high-cost home loan without first receiving certification from a thirdparty nonprofit credit counselor, approved by the United States Department of Housing and Urban Development and the Department of Banking and Insurance, that the borrower has received counseling on the advisability of the loan transaction or completing another substantial requirement developed by the department. h. A creditor shall not pay a contractor under a home-improvement contract from the proceeds of a high-cost home loan, unless the instrument is payable to the borrower or jointly to the borrower and the contractor, or, at the election of the borrower, through a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower, the creditor, and the contractor prior to the disbursement. i. A creditor shall not charge a borrower any fees or other charges to modify, renew, extend, or amend a high-cost home loan or to defer any payment due under the terms of a highcost home loan. j. A creditor shall not charge a borrower points and fees in connection with a high-cost home loan if the proceeds of the high-cost home loan are used to refinance an existing high-cost home loan held by the same creditor as note holder. k. Notwithstanding any other law to the contrary, a creditor making a high-cost home loan that has the legal right to foreclose shall use the judicial foreclosure procedures of this State so long as the property securing the loan is located in this State. l. No creditor making a high-cost home loan shall directly or indirectly finance points and fees in excess of 2% of the total loan amount. C.46:10B-27 Affirmative claims, defenses by borrower. 6. a. Notwithstanding any other law to the contrary, if a home loan was made, arranged, or assigned by a person selling either a manufactured home, or home improvements to the dwelling of a borrower, or was made by or through a creditor to whom the borrower was referred by such seller, the borrower may assert all affirmative claims and any defenses that the borrower may have against the seller or home-improvement contractor limited to amounts required to reduce or extinguish the borrower's liability under the home loan, plus the total amount paid by the borrower in connection with the transaction, plus amounts required to recover costs, including reasonable attorney's fees against the creditor, any assignee or holder, in any capacity. b. Notwithstanding any other provision of law, any person who purchases or is otherwise assigned a high-cost home loan shall be subject to all affirmative claims and any defenses with respect to the loan that the borrower could assert against the original creditor or broker of the loan; provided that this subsection shall not apply if the purchaser or assignee demonstrates, by a preponderance of the evidence, that a reasonable person exercising reasonable due diligence could not determine that the mortgage was a high-cost home loan. It shall be presumed that a purchaser or assignee has exercised such due diligence if the purchaser or assignee demonstrates by a preponderance of the evidence that it: (1) has in place at the time of the purchase or assignment of the loan, policies that expressly prohibit its purchase or acceptance of assignment of any high-cost home loan; (2) requires by contract that a seller or assignor of home loans to the purchaser or assignee represents and warrants to the purchaser or assignee that either (a)it will not sell or assign any high-cost home loan to the purchaser or assignee or (b) that the seller or assignor is a beneficiary of a representation and warranty from a previous seller or assignor to that effect; and (3) exercises reasonable due diligence at the time of purchase or assignment of home loans or within a reasonable period of time thereafter intended by the purchaser or assignee to prevent the purchaser or assignee from purchasing or taking assignment of any highcost home loan. c. Notwithstanding any other law to the contrary, but limited to amounts required to reduce or extinguish the borrower's liability under the home loan plus amounts required to recover costs
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P.L. 2003, CHAPTER 64 7 including reasonable attorney's fees, a borrower acting only in an individual capacity may assert against the creditor or any subsequent holder or assignee of the home loan: (1) within six years of the closing of a covered home loan, a violation of this act in connection with the loan as an original action, or as a defense, claim or counterclaim after an action to collect on the home loan or foreclose on the collateral securing the home loan has been initiated or the debt arising from the home loan has been accelerated or the home loan has become 60 days in default; and (2) at any time during the term of a high-cost home loan after an action to collect on the home loan or foreclose on the collateral securing the home loan has been initiated or the debt arising from the home loan has been accelerated or the home loan has become 60 days in default, any defense, claim or counterclaim. d. It is a violation of this act for any person, in bad faith, to attempt to avoid the application of this act by: (1) Dividing any loan transaction into separate parts; or (2) Any other such subterfuge, with the intent of evading the provisions of this act. e. Nothing in this section shall be construed to limit the substantive rights, remedies or procedural rights, including, but not limited to, recoupment rights under the common law, available to a borrower against any creditor, assignee or holder under any other law. The limitations on assignee liability in subsection b. of this section shall not apply to the assignee liability in subsections a., c. and d. of this section. C.46:10B-28 Enforcement by department. 7. a. The department shall conduct examinations and investigations and issue subpoenas and orders to enforce the provisions of this act with respect to a person licensed or subject to the provisions of the "New Jersey Licensed Lenders Act," P.L.1996, c.157 (C.17:11C-1 et seq.). b. The department shall examine any instrument, document, account, book, record, or file of a person originating or brokering a high-cost home loan under this act. The department shall recover the cost of examinations from the person. A person originating or brokering high-cost home loans shall maintain its records in a manner that will facilitate the department in determining whether the person is complying with the provisions of this act and the regulations promulgated thereunder. The department shall require the submission of reports by persons originating or brokering high-cost home loans which shall set forth such information as the department shall require by regulation. c. In the event that a person fails to comply with a subpoena for documents or testimony issued by the department, the department may request an order from a court of competent jurisdiction requiring the person to produce the requested information. d. If the department determines that a person has violated the provisions of this act, the department may do any combination of the following that it deems appropriate: (1) Impose a civil penalty of up to $10,000 for each offense, 40% of which penalty shall be dedicated for and used by the department for consumer education through nonprofit organizations which can establish to the satisfaction of the department that they have sufficient experience in credit counseling and financial education. In determining the penalty to be assessed, the commissioner shall consider the following criteria: whether the violation was willful; whether the violation was part of a pattern and practice; the amount of the loan; the points and fees charged; the financial condition of the violator; and other relevant factors. The department may require the person to pay investigative costs, if any. (2) Suspend, revoke, or refuse to renew any license issued by the department. (3) Prohibit or permanently remove an individual responsible for a violation of this act from working in his present capacity or in any other capacity related to activities regulated by the department. (4) Order a person to cease and desist any violation of this act and to make restitution for actual damages to borrowers. (5) Pending completion of an investigation or any formal proceeding instituted pursuant to this act, if the commissioner finds that the interests of the public require immediate action to prevent undue harm to borrowers, the commissioner may enter an appropriate temporary order
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P.L. 2003, CHAPTER 64 8 to be effective immediately and until entry of a final order. The temporary emergent order may include: a temporary suspension of the creditor's authority to make high-cost home loans under this act; a temporary cease and desist order; a temporary prohibition against a creditor transacting high-cost home loan business in this State, or such other order relating to high-cost home loans as the commissioner may deem necessary to prevent undue harm to borrowers pending completion of an investigation or formal proceeding. Orders issued pursuant to this section shall be subject to an application to vacate upon two days' notice, and a preliminary hearing on the temporary emergent order shall be held, in any event, within five days after it is issued, in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). (6) Impose such other conditions as the department deems appropriate. e. Any person aggrieved by a decision of the department and who has a direct interest in the decision may appeal the decision of the department to the commissioner. The appeal shall be conducted in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). f. The department may maintain an action for an injunction or other process against any person to restrain and prevent the person from engaging in any activity violating this act. g. A decision of the commissioner shall be a final order of the department and shall be enforceable in a court of competent jurisdiction. The department shall publish the final adjudication issued in accordance with this section, subject to redaction or modification to preserve confidentiality. h. The provisions of this section shall not limit the authority of the Attorney General or the Public Advocate as established pursuant to P.L. , c. (C. ) (now before the Legislature as Assembly Committee Substitute for Assembly Bill Nos. 345 and 2341) from instituting or maintaining any action within the scope of their respective authority with respect to the practices prohibited under this act. C.46:10B-29 Violations, remedies, liability. 8. a. Any violation of this act constitutes an unlawful practice under P.L.1960, c.39 (C.56:8-1 et seq.). Any borrower may seek damages under the provisions of section 7 of P.L.1971, c.247 (C.56:8-19) or subparagraph (a) of paragraph (1) of subsection b. of this section, but not both. b. Except as provided in subsection a. of this section and, where applicable, subject to any limitation on the amounts recoverable against a holder or assignee pursuant to section 6 of this act, in addition to the remedies available to a borrower under P.L.1960, c.39 (C.56:8-1 et seq.) and without limiting those remedies: (1) Any person found by a preponderance of the evidence to have violated this act shall be liable to the borrower for the following: (a) For material violations, statutory damages equal to the finance charges agreed to in the home loan agreement, plus up to 10% of the amount financed; (b) Punitive damages, when the violation was malicious or reckless in appropriate circumstances as determined by the fact-finder; and (c) Costs and reasonable attorneys' fees. (2) A borrower may be granted injunctive, declaratory, and such other equitable relief as the court deems appropriate in an action to enforce compliance with this act. (3) The remedies provided in this section are not intended to be the exclusive remedies available to a borrower, nor must the borrower exhaust any administrative remedies provided under this act or any other applicable law before proceeding under this section. c. A creditor in a home loan who, when acting in good faith, fails to comply with the provisions of this act, will not be deemed to have violated this section if the creditor establishes that either: (1) Within 45 days of the loan closing, the creditor has made appropriate restitution to the borrower, and appropriate adjustments are made to the loan; or (2) Within 90 days of the loan closing and prior to receiving any notice from the borrower of the compliance failure, and the compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid such
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P.L. 2003, CHAPTER 64 9 errors, the borrower is notified of the compliance failure, appropriate restitution is made to the borrower, and appropriate adjustments are made to the loan. Examples of bona fide errors include clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person's obligations under this section is not a bona fide error. d. The remedies provided in this section are cumulative. C.46:10B-30 Rights, remedies, prohibitions declared additional, cumulative. 9. The rights, remedies, and prohibitions accorded by the provisions of this act are hereby declared to be in addition to and cumulative of any other right, remedy, or prohibition accorded by the common law or statutes of the United States or of this State, and nothing herein shall be construed to deny, abrogate, or impair any such common law or statutory right, remedy, or prohibition. Without limiting the foregoing, the rights, remedies and prohibitions accorded by the provisions of this act are hereby further declared to create no presumption that any home loan or any term in a home loan is not unconscionable, whether or not the home loan or loan term, alone or in conjunction with other terms of the loan, violates the provisions of this act. C.46:10B-31 Law of state of location of property applicable. 10. The law of the state in which the property is located shall be applied to all transactions governed by this act regardless of where those transactions originated. This act shall apply to all loans made or entered into after the effective date of this act. C.46:10B-32 Program of consumer counseling, awareness. 11. The Director of the Division of Banking in the Department of Banking and Insurance, in consultation with the Director of the Division of Consumer Affairs and the Division of Civil Rights in the Department of Law and Public Safety, shall develop and implement a program of consumer counseling and awareness designed to inform the public about the methods by which predatory creditors impose unconscionable and noncompetitive fees and charges as part of complex home mortgage transactions, to protect the public from incurring those fees and charges, and otherwise to encourage the informed and responsible use of credit. C.46:10B-33 Liability of mortgage broker. 12. Notwithstanding any provision of this act to the contrary, a mortgage broker shall be liable under the provisions of this act only for acts performed by the mortgage broker in the course of providing mortgage brokering services. However, a mortgage broker may be held liable for acts performed by the mortgage broker outside the scope of mortgage brokering services if the acts are related to the purchasing or the making of a home loan and are otherwise prohibited under this act. C.46:10B-34 Preemption of local rules, regulations. 13. No municipality, county or political subdivision thereof, shall enact an ordinance or resolution or promulgate any rules or regulations relating to this act. The provisions of any ordinance or resolution or rules or regulations of any municipality or county relative to abusive home loan lending practices are superseded by the provisions of this act. C.46:10B-35 Regulations. 14. The Commissioner of Banking and Insurance shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the provisions of subsections f. and g. of section 5 and section 11 of this act except that prior to the effective date of this act the commissioner may take those actions and promulgate those regulations necessary to implement these provisions. 15. This act shall take effect on the 210th day following enactment and shall apply to home loans closed on and after that date, except that section 14 shall take effect immediately, and except that a loan in existence on the effective date of this act and which meets the definition of
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P.L. 2003, CHAPTER 64 10 home loan in this act shall be a home loan for the purposes of subsection b. of section 4 of this act Approved May 1, 2003.
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NJ Forensic Analysis Sample

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Forensic Analysis

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

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This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

This document is Copyrighted property. Unauthorized use is not allowed. 2008-2011

Enforcement of Lost or Destroyed Instruments

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CURRENT STRATEGIES 1. Verify the Violation

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Some of these considerations are;

(marketing, taxes, insurance, repairs, security),

3. Bringing a Cause of Action to the Courts

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MORTGAGE COMPLIANCE ANALYSIS REPORT

GSE (Based on Fannie Mae Lender Announcements and Lender Letters)

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$845.00 6.818% $1,889.00

$14,400.00 12.690% $22,812.19

-$13,555.00 -5.872% -$20,923.19

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Result NOT PERFORMED

Yield 6.410% 4.690%

Date 01/01/2006 03/15/2007

Amount of Payments $1,867.96 $1,870.42

N/A N/A N/A NOT TESTED

PASS PASS PASS

PASS PASS PASS

Countrywide Bank, FSB Payless Mortgage Corp Not Configured No Yes

Branch NMLS ID:

GSE (Fannie Mae public guidelines)

Last Name: DTI Ratio:

Street Name County

Type (St, Ave, etc.) State

Egg Harbor Township Type: Occupancy: Loan Information Loan Amount:

NJ Detached SFD Primary Residence

08234 Number of Units:

(exclude PMI, MIP, Funding Fee financed)

Prepayment Penalty Program Name: Prepayment Penalty Program:

Max. Prepayment Penalty Amount:

Construction Term: Interest Reserve:

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First Adjustment: Subsequent Adjustment: Adjustment Rounding:

Cap Cap Round nearest 1/8

Rate: Rate: Rate: Rate: Rate:

Term: Term: Term: Term: Term:

Interest Only (excl. Negative Amortization and Option ARM) Term:

Dual Amortization Initial Amortization Term: Subsequent Amortization Term:

Prepaid Finance Charge