Your best tool to negotiate with your mortgage company is the discovery of a Truth in Lending Act (TILA) violation, which in some cases may give you the right to rescind the loan. State and Federal laws require mortgage companies to follow specific guidelines when originating home loans and as a result many mortgage loans have TILA and/or RESPA violations which can be used as bargaining tools when negotiating a loan modification with the mortgage company.
Many of the home loans originated by brokers and lenders over the last few years have unexplainable fees and charges or were manipulated by overstating the borrowers’ income or inflating the property value to allow the lender to illegally profit from the sale of mortgages to investors in the secondary market. Subprime mortgages with hidden interest rate adjustments and pre-payment penalties or Option ARM loans with minimum payment options allowed borrowers to differ interest to a point in future when the loan recasts and forces the borrower into hardship by paying a much higher mortgage payment. In most cases refinancing is not an option due to declining property values or high debt to income ratios. Only a Forensic Loan Audit can discover and document these violations, which may be used against the lender when negotiating a loan modification.
Another common violation occurs when the creditor fails to properly provide a notice of the borrower’s right to cancel. The right of rescission may be extended for up to three years in certain circumstances. When the right is extended for three years you can rescind the loan at any time before the three years are up meaning that the loan is treated as if it never existed. This means that the creditor must refund all interest paid, all closing fees, all broker fees, and even pay for your attorney fees.
The extended right of rescission is a powerful tool to help borrowers who have been victims of predatory lending. During a Forensic Mortgage Loan Audit we often discover TILA violations, which can be used as leverage when negotiating a loan modification.
This is not intended to be construed as legal advice.