Computer-Generated Loan Audits
Not A Good Idea
Many people are confused about the purpose and process of loan auditing. Unfortunately, many people who actually offer and conduct loan audits for a living are also in this category!
Let’s recap. When you buy a house you deal with several service- providers. You probably have an escrow agent, an appraiser, maybe a mortgage broker and you certainly have a lender.
All of these parties are required to provide numerous statutory disclosures to you by certain time frames so that you can make an informed decision as to whether the terms of the loan are right for you. A comprehensive loan audit will begin with this paperwork and examine it for regulatory compliance. This is where many loan audits stop.Â This information is input into a software programwhich spits out a checklist as to which statutes were violated and which were not.
It is estimated that in the last several years more than 90% of all loan transactions contained errors, misrepresentations or downright fraud so the chances of finding even “soft violations” are very high.
But this is just the tip of the iceberg. In addition, your broker and/or lender is required follow reasonable and prudent underwriting procedures, deal with you in a fair way and comply with local State Civil codes which govern Contract law and professional business practices.
In order to do a thorough and comprehensive loan audit, a “narrative” of the loan transaction is also required. Who said what, who did what when, who introduced parties to each other, when was paperwork actually signed (not always the same date on the document), how were documents delivered.
A complete picture of the entire loan transaction along with a full set of loan disclosures and documents will provide the best discovery of any violations of state or federal law.