What the hell is a Forensic Loan Audit you ask?
According to the SPAM email (above – I drew the boxes for emphasis) that landed in my inbox last night, a company called National Loan Auditors provides a service that:
1) Markets to loan originators with the purpose of providing loan file audits that
“expose federal, state, county and statute violations, along with any unethical predatory lending practices.”
2) So mortgage professionals can
“leverage [their] company or firms ability to assist [their] past and present customers, helping them negotiate better mortgage rates and terms with their existing lender…”
3) Oh, and by the way the mortgage professional can also
“earn up to $1,700 on each case file”
Um, so what you’re saying is that I can market to my past clients, identify errors, omissions and fraudulent activity that occurred when I originated their loan AND pocket $1,700 in the process? Seriously. Am I reading this incorrectly?
Our company used to provide loan file audits to our clients too. [If we could have made money doing it, we still would be.] The purpose of our audits was to help identify these same types of errors and omissions. The difference was in our motivation: our clients used our feedback to improve their compliance scores on future originations. From experience, I can tell you that even the cleanest and most ethical shops had compliance errors in their files – most of which were innocent, victimless mistakes. For example, in the State of Georgia, an originator is considered to have taken a Loan Application when collecting any financial information from the borrower – and of course a Good Faith Estimate is required to be sent within 72 hours of the loan application. This is a common mistake originators make (both banker and broker by the way) – one of many easy to make errors. There are 20 other similar examples I could point out here but let me get back to the point…
Now you have these vultures performing similar audits with the malicious intent of leveraging even the most benign of errors into strong-arming banks into loan modifications.
Does this type of value proposition help illuminate why the large depository banks are trying to put the small broker out of business? Make no mistake, most of the mortgage originators who are left in the game today are professionals. I have the privilege of working with many of them on a daily basis. But it’s still way too easy for any schmuck to quit his job at the car lot and originate mortgages – and THAT, my friends (yes, that’s a pun) is the problem with the industry.
I don’t have the answers. But here’s a start – all mortgage originators should have the equivalent of the Series 7 designation for financial professionals. Obviously, it shouldn’t be the same curriculum, but my point is that it provides 1) a strong educational foundation and 2) a high barrier to entry into the business. Mind you, this is only a start. Mortgage professionals also ought to have more skin in the game – one of the few components of HR 1728 I agree with.
This is the scariest article I’ve ever written because it seems I have everything to lose by picking a fight with someone I don’t even know. Further, I have nothing to gain. But I wrote about this sort of thing on several occasions and it’s high time that I stepped up and provided an example of how this code ought to work. When we see things that reek of injustice and damage our industry’s good name, it’s up to US to speak up and take action. It would have been really easy for me to just delete that ridiculous email but instead I decided to write this article.
I sincerely hope it makes a difference. Greg Swann, Brian Brady – you guys have inspired me to try and make a difference. Albeit, this is really damn scary.
