By: Michael Powers
Everyone knows that the flurry of mortgage paperwork produced during the mortgage boom of the mid 2000’s is fraught with RESPA (The Real Estate Settlement Procedures Act ) and TILA (Truth In Lending Act) violations. The fact is that mortgages were being written which had no regard for the rules and procedures embodied in RESPA and TILA. In addition, mortgages were being written for unqualified borrowers, which contained terms which were not designed as long term solutions and would likely end up in default. Some loans even allowed borrowers to completely fabricate their income (stated income loans), and had terms which would cause the mortgage balance to consistently rise (negative amortization loans)! Given this ability to get a mortgage without having to demonstrate you could afford it, millions of Americans joined in the party, and the need for staff to handle the demand soared. To help them with the overwhelming volume, mortgage brokers were hiring staff members that were not sufficiently trained in the procedures necessary to comply with RESPA and TILA laws. Add it all up, and you have the definition of a “predatory” mortgages which were written with little regard for applicable laws governing mortgage origination.
As a result, estimates from numerous credible sources suggest that more than 85% of the loans written between 2004 and 2008 have some RESPA and/or TILA violations. When the mortgage crisis began, attorneys and other service providers were quick to identify these violations and attempt to use them as defenses and legal leverage in negotiations with lenders. As a result, some companies began to offer “forensic mortgage audits” to distressed homeowners as a tool to be used against their lender in negotiations or lawsuits as a standalone product. Unfortunately, courts have consistently ruled that most of the violations exposed in the “audits” are minor, and certainly not substantial enough to negate a mortgage, or provide a defense for payment default. Consequently, lenders have generally scoffed at threats of lawsuits based on RESPA and TILA violations.
So, what does this mean to homeowners? Well, unless your “forensic mortgage audit” was conducted by a true expert that is going to be called as an expert witness by the attorney you have hired to sue your lender, it is basically useless. And, even under those ideal conditions, the value of the expert’s findings will be subject of the opinion of a judge as it relates to the totality of your case. In short, as a standalone product, it is nothing more than an expensive gimmick for desperate homeowners that has very little value. As such, the Federal Trade Commission (FTC) and other regulatory agencies have frowned upon the sale of these “audits”, and in some states made them illegal.
So, does this mean that all of those legal violations are meaningless? Of course not. The biggest problem with a legitimate “forensic mortgage audit” is having the audit conducted by someone who is actually qualified to perform such an audit. In order for a court to recognize the legitimacy of such an audit, it would have to be conducted by someone that the court considers an “expert” and would have to include every element of the entire loan process. A legitimate “forensic mortgage audit” would have to take into account the realtors involved, the inspections, the appraisals, the mortgage broker’s documents, the lender’s documents, the underwriter’s documents, as well as the loan program guidelines. It would also have to review the title documents from the closing and the documents recorded after title execution. Thereafter, any sale or assignment documents would have to be analyzed as well. So, who is qualified to consider all of these elements and conduct an analysis of so much information, requiring so much knowledge and expertise? In our experience, almost no one.
We have, however, found one man who fits this bill. His name is Robert R. Ruckstuhl. Mr. Ruckstuhl has testified as an expert witness for mortgage related matters in State and Federal Courts on dozens of occasions. He has also testified in Congress regarding mortgage related matters and the HAMP loan modification program. Mr. Ruckstuhl is one of only a handful of people in the country to be simultaneously licensed and certified as an appraiser, mortgage broker, title agent, loan officer, home inspector and notary for more than 15 consecutive years, and is truly an expert in all things mortgage. Mr. Ruckstuhl currently serves as a consultant to multiple nationwide law firms, all of which are promoted by Mortgage Relief Project.
In conclusion, standalone “forensic mortgage audits” nothing more than an expensive gimmick for homeowners. The only way such an audit is valuable, is if it the audit is performed by a true expert for the purpose of exposing legal violations which will be included in a lawsuit against a lender, and that expert is qualified to testify as an expert witness in court regarding the audit’s findings. So, if someone offers to sell you a forensic mortgage audit, ask them if the person performing the audit has the credentials to qualify as an expert witness in court, and if that person will actually testify in that capacity. If that person cannot answer “yes” and prove it, you will know they are trying to take your money.