Ok, so it’s been a wee bit over a week since we last touched on this topic.. ok, over a month but the point is here we are!
Do you know the difference between the loan originator, the owner of the loan and/or the servicer of a mortgage loan?
Many, many, moons ago in a galaxy far, far away all these labels referred to the same company. Some companies still service loans ‘in house’ meaning they originate and service the same loan. It is very rare in this day and age that all 3 parts would be played by the same company. The originator of the loan is the company that actually funded the original loan (i.e. gave you the money) in exchange for a lien against the property. The servicer of the loan is the company that you make your payments to, complain to about customer service that sort of thing. Sometimes if the original company retains the loan (for example B of A) they would pay a servicing company to do all the servicing related maintenance on the loan (for example B of A Servicing Corp).
The ‘owner’ or ‘investor’ on the loan could conceivably be anyone or any entity that cared to buy the loan product on the open market. Please keep in mind that this is a very simplified explanation of this model. There are many twists and turns, regulations, companies buying loans back, borrowers defaulting.. any of millions of things that can change the analysis but in its simplest form the owner is the person/entity that purchased the loan from the originator and pays the servicer to maintain the loan.
The reason for this simplified explanation is related to the loan audit. If an audit of your mortgage loan reveals loan origination violations of mortgage regulations (law) that could give you some leverage in trying to negotiate a loan modification or refinance right? No, not always.
There are bars to recovery such as a statute of limitations running out of time or a company that declared BK since they funded your loan- these facts usually mean you are out of luck altogether. A significant obstacle to obtaining leverage with a loan audit against a loan originator is that they no longer own the loan. If company A funded your loan, then sold the loan to investor B, who paid Servicer C to maintain the loan why would C care if A made a mistake? In theory, yes every mistake is significant, in practice however..not so much. Even if all the stars are in alignment, you kept your loan documents with proof of the error, you have discovered the issue within the applicable statute of limitations and the loan was sold from A straight to C it is unlikely that you will gain any advantage with a loan audit by trying to go through the ordinary customer service/loss mitigation channels.
The standard customer service representative with your loan servicer knows little to nothing about loan origination. They wouldn’t know an origination RESPA violation if it leapt up and bit them in the nose! Why would they? That’s not what they do is it? No, it isn’t what they do at all. Generally speaking if you were to find a significant origination error in your loan documents I would suggest you run straight to the nearest qualified attorney to discuss it.
Notice I said qualified attorney? Your task is not only to find an attorney that can unearth and explain the violation, but will also understand the remedies available to you as a result of that violation as well as who to present that information to. Depending on the seriousness of the violation, the timeliness of its discovery and the remedy available by statute the ‘who’ in this equation may shift. Unfortunately this is a very fact dependant analysis that doesn’t lend to simple explanation here. Some examples of the ‘who’ that are often overlooked include the following:
- Department of Housing & Urban Development (HUD) [www.hud.gov]
- Department of Real Estate (DRE)
- State Attorney General (AG)
- Local Congressperson
- State Insurance Commissioner
- State Department of Consumer Protection (not in all states)
- Department of Corporations (not in all states)
Of course any demand that goes to the list above should also include the loan originator, servicer and the owner/investor if you find out who that is. Always start any RESPA complaint with HUD, the federally funded agency charged with enforcement of RESPA. Bear in mind the statute of limitations if you are going it alone without the assistance of a qualified attorney. Government agencies are incredibly busy and especially backlogged with the recent mortgage meltdown. The HUD website has detailed instructions and forms which will assist in any RESPA issue you may have discovered.
When all else fails don’t underestimate the power of the media. If you have been wronged, have significant damages and your attorney can’t get past the wall of paper the mortgage company is hiding behind it is possible to nudge them along with a phone call from Chanel 9 News or the local Congressman.
In summary, yes I suppose loan audits could be helpful in certain situations, but I wouldn’t ever recommend paying $1,500 for a loan mod shop to slap one together for you. When in doubt, contact HUD or an attorney with experience in mortgage loan compliance to protect yourself adequately.