Loan Audits
Truth-In-Lending Act (TILA) Violations — Inaccurate reporting of APR and finance charge calculations on borrower disclosures. Calculation errors may occur as a result of failing to include one or more prepaid finance charges in the calculations, incorrect disclosed funding dates, or last-minute changes made to the loan by the settlement agent at the closing table. If understated, the lender is in violation of the federal Truth-In-Lending Act as well as many state laws prohibiting such actions. Lender required to reimburse borrower for the difference, and may be subject to statutory damages, administrative sanctions, loan buy-backs, and lawsuits. In addition, the rescission period may reopen, creating additional risk for the lender.
Anti-Predatory Lending Violations — Consumer protection laws, regulations and guidelines exist at the federal, state and local levels, and function by placing strict but varying limits on the rates and fees that can be charged to a borrower. Violations typically occur because of the vast misunderstanding of how they work. Examples of violations include failing to include fees such as yield spread premiums in the calculations or using an incorrect loan amount value to perform the calculation. Penalties for violations are as varied as the laws that govern. Typical costs include borrower reimbursements, statutory and punitive damages, attorneys’ fees, administrative fines and penalties, loan buy-backs and reformation, and class-action lawsuits.
State Law Violations (Non-Predatory) — Failing to maintain adequate safeguards in loan origination systems and well as document software systems results in loans containing illegal terms or provisions. Examples include illegal prepayment penalty clauses, rates that are usurious, or fees that are not allowed to be charged. Typical penalties include actual damages and costs, attorney’s fees, administrative fines and penalties, loan buy-backs, and class-action lawsuits.

Reverse Mortgage Violations — With an expected 55 million Americans turning 62 in the coming years, the “next big thing” will almost certainly be reverse mortgages. Common violations include failing to adequately disclose the APR, which is different than that of forward mortgages, and providing incomplete or improper disclosures. Because this is such a new segment in the industry, penalties are less clear than with forward mortgages. As these types of mortgages affect senior citizens, class-action lawsuits are a real and serious threat.
Real Estate Settlement Procedures Act(RESPA) Violations — RESPA prohibitions place limits on a lender’s or broker’s ability to charge or pay fees that are hidden from the borrower. Common violations include accepting kickbacks or referral fees, upcharging for services provided by third parties, and charging for services not actually performed. Penalties include actual damages, administrative fines and class-action lawsuits.
Others: Lending without providing borrowers a reasonable, tangible net benefit, state-specific disclosure errors, servicing violations, Fair Lending violations.
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