|1. Recently, many people ask about the loan modification and loan litigation. What are they about?
The loan modification is requesting a bank to lower the interest rates and reduce payments due to a current struggling situation.
The loan litigation is suing a bank for any faulty document revealed from the forensic loan document review or mortgage audit. The agreement will be reached once the litigation starts.
2. Your ad says the settlement will be reached in 90% of the cases. Is that true?
We cannot say exactly what percentages. While not 90%, we can say it may still be up to 40~50%.
3. Would you, then, be able to find out which option applies to a customer when reviewing documents?
Our company has a separate team for loan document review, which thoroughly reviews respective cases (by bank) and immediately finds out which option is more feasible, loan litigation or loan modification.
4. What are the differences?
The loan modification begins by submitting to a bank with a focus on document and handship letter, followed by a 3-week-to-2-month long negotiation with the bank to reduce interests and payments.
The forensic loan document review or mortgage audit finds out if the bank documents or customer documents are incorrect or faulty under the provisions of the High Risk Home Loan Act (subprime loan or 100% loan), which went in effects in the second half of 2006 and will be explained later. This process may take 4 months at minimum up to 10 months.
5. What causes the time difference in processing documents?
There are two types of banks: banks that receive payments directly or institutions that provide payment collection services for banks.
For example, large banks, such as Countrywide, Bank of America, Chase, or Wamu, take less time due to their direct involvement, and other banks, such as subprime bank agent, New Century, and WMC, use the service agents. These agents do not follow up what banks demand in a timely manner, as they make profits on late fees or charges on delinquent payments, which results in being time consuming.
The servicing institutions are reluctant to actively lower interests and, if so, convert to a program that allows to pay only interests on the principal with the interest rate lowered for up to 5% only.
6. Will claiming for damages, then, lead to lowering the principal?
Of course, having the bank caught for mistakes may lead to reducing the principal along with significantly lowering interests, or the loan may be modified to more favorable terms for the customer. As the banks do not want to be involved in the litigation from their faulty documents, once caught, they would modify the loan to the limit of what they can accept for the customer demands. It would also be better off for the customers to deal with the situation to their advantage rather than benefit from litigation.
7. Then, what procedures will the litigation proceed with?
As said previously, our document review team will review the cases first to save time for our clients and separate them into the modification and litigation, as the litigation will be of no use for the documents that is more suited for the modification, which will waste time and get nowhere.
This is why our document review team works to speed up the process.
8. What difficulties are expected for the bank litigation?
There surely are difficulties. It is not easy to prove whether initial loan documents, the loan program itself, or disclosure documents for customers are faulty or different from what was promised.
In the end, when founding out any faults in documents from the forensic review, we¡¯d like to leverage the current situation to lower principal and interest to the advantage of our clients rather than bring back the loan itself.
9. What is reviewed under the forensic review?
• Loan Application
• Loan Terms
• Good Faith Estimate and Settlement Statement (HUD-1)
• Signed Loan Documents / Compliance Papers (Legal documents)
• Truth in Lending Act (TILA) and Real Estate Settlement & Procedures Act (RESPA)
. APR review.
Bank-prepared documents pertaining to the newly available loan programs from last 5 years and the fundings with predatory loan by subprime financing companies, which found these documents to be significantly erroneous and led to many subprime banks sued and shut down.
10. What is the High Risk Home Loan Act?
Key provisions relate to:
• Ability to repay (if the client can be trusted for payments)
• Verification of ability to repay (verify income)
• Prepayment penalty: 3% for 1st Yr./2% for 2nd Yr./1% for 3rd Yr. (prior to the provision, 6 month interests were charged for 3 or 5 years)
• Financing of fees and points: not to exceed 6% of the loan amount. Clients, when in violation, may be able to have the loan modification for better terms and get refunds for damages.