Experts and Forensic Mortgage Reviews

It appears I need to weigh in here. My objective was to let the “free market” operate and have people offer various services that would assist homeowners in fighting or challenging their lenders. What we have instead is some service providers performing some of the work needed in a forensic review and many of these service providers calling themselves experts. As with any contest, if the referee leaves the field, the players will run amok and I sense that happening here. By the way, so there is no mistake about it, I am the referee.

First on the “expert issue” let us be clear. Expert testimony consists of opinion testimony or factual testimony not about an individual case so much as about an entire industry or marketplace. The opinions rendered are then applied by either direct evidence in the legal case that is pending before a court of law or by hypothetical questions. You are not an expert just because you say you are. You’re not even an expert if you really know more than others. You are an expert if your testimony has been used or officially accepted by court order based upon a complete showing of your credentials, your education, your prior experience in the industry, your prior experience in expert testimony, and a good clear explanation of the scope of your testimony and upon what resources you rely in rendering opinions.

To make it doubly clear, although I have testified as to my opinions and the workings of derivatives and securitization at deposition in current court proceedings and my declarations have been accepted in court as expert affidavits, I am not technically a recognized QUALIFIED expert witness in securitization, TILA, etc., because my opinions and testimony have not actually been used in an evidentiary hearing. So even though I have been an expert on other matters in federal and state courts, I am NOT yet officially a qualified expert in the subject of this blog and my own Garfield Continuum seminars that Brad Keiser and I do every few weeks, despite their approval by various state Bar(s) for CLE credits for lawyers. Compare that with the claims that others are making and you will see why I am writing this. You are not getting an expert or even someone who can claim to be an expert if they merely WANT to be an expert. Check carefully with references and examples of court testimony before you accept as true that they are or could be an expert. And even if they can be it doesn’t mean they would be good at it. Ask any real litigator, the success or impact of an expert witness is less about his/her credentials and knowledge and more about the ability to communicate in understandable terms often complex subject matter to the audience(judge/jury). 

Forensic reviews. People like to use the word “audit” and occasionally I have slipped those terms in as well. But an audit is something very different than what is being done by any service providers including the ones recommended or being allowed to promote themselves on this blog. It is a review not an audit. You may like the sound of the word “audit” better because it seems more important. But an audit is very different than the work being performed here.

Here is the bottom line on forensic reviews: a TILA “audit” is good and it might get you some money back but it won’t, in most cases, do ANYTHING to help you keep your house. A QWR (Qualified Written Request) should be part of the output of a review, and it can be used against the lender when the matter gets to court, but the QWR itself does NOT stop foreclosures, and it does nothing else on its own since there is at least doubt as to what consequences befall a lender who refuses to answer it properly. The same thing applies to DVL (Debt Validation Letters) or demand letters to appraisers, closing agents, trustees, real estate brokers, mortgage brokers etc. These are all preludes to court action, discovery and motion practice where you pin the lender into admitting they are a pretender lender.

A proper forensic review would include TILA, RESPA, SEC (Securitization), Public Records (Chain of title), Appraisal verification, and plugging in the actual cast of characters in your loan into a chart that has the generic players in the securitization scheme. It costs more than a TILA audit standalone product. But the TILA audit leaves your house and tens of thousands of dollars in damages on the table while you get to collect, on a good day, a few thousand dollars in rebates. The review would also take note of disparities in signatures, dates of filing, and other title related aspects of the loan or foreclosure — things that many times make the difference between sale or cancellation of the sale.

Because of all this I have ordered a review of the marketplace and I have reached out to some old friends in the banking and legal community who know how to organize things so we can all get a forensic review product out that actually helps homeowners and lawyers. The idea is to properly enable and arm every service provider who wants to do this work and use this blog as a marketing channel. Until we make that announcement, be very careful of who you pick to assist you in “TILA or Loan AUDITS”  or forensic reviews. Most of them are not the real thing.

17 Responses

  1. Neil,
    Where do I obtain a forensic audit in Washington State? I have asked in my QWR for all the documentation for a full audit, but am under the gun to find someone to help with it.

    Can you suggest? Does your team prepare this?

    Please help.

  2. Any referral’s for mortgage analysis yet Mr. Garfield?

  3. Hello, Neil:
    Thank you for your quick response. I will send an email immediately and speak with you this week.

  4. Linda: Delighted that you picked up on our concerns. If you will send an email to with your contact information we will get in touch with you. Mention this exchange.

  5. Neil-

    First of all, I would like to say thank you for this great website from a first-time commenter.

    Like Christine Springer, I welcome your review of our loan audit as well. We consult attorneys all time for their review and input about the effectiveness of our audits for them – some of whom have seen or used your audits prior to using our audits. We had decided to not include the securitization in our audit because we were primarily concentraing in CA and the CA judges reject the “Who owns the note?”, as told to us by CA attorneys. However, we have now decided to include it as we are getting requests throughout the country, and because of the Kansa MERS ruling.

    As to some people beliefs that only attorneys or CPAs should audit mortgage loans, I think that is absolutely wrong and could be the worst direction for the borrower to take. We have spoken to many RE attorneys who know absolutely nothing about mortgage loans: types, qualifications, practices, etc., and what was happening behind the scenes in the industry – including those with broker licenses. I wouldn’t go to a podiatrist if I needed a second opinion on a diagnosis of high blood pressure or brain cancer simply because he is a doctor.

    Our auditors have many years of underwriting, compliance and lending experience. We take the approach that we are CSI. We simply uncover what we find, if anything: violations, fraud by lenders, brokers and other parties to the transaction, and yes, the borrower at times, and then leave it up to the attorneys to strategize and litigate. In fact, most of our audit requests come from attorneys.

    Christine is correct – We’re not all hacks. As with you, my company is truly trying to help people. However, I also agree with you that there are many out there who do not have the same integrity and elthics. One of our ideas to possibly “weed out” or help borrowers to make an informed decision is to form a trade association for loan auditing companies that would set standards and qualifications. If you are interested, I would love to talk to you further about the plan as your input and participation would be needed and greatly appreciated (You are the Guru! :-)). I realize you have a very active blog and will probably not respond to my comment, so if I will also follow up with you soon.

    Best Regards,

  6. Neil,

    I met you in January in Napa. Thank you for addressing the problems with auditors. Most of these TILA/RESPA auditors are simply loan officers who decided to buy software to do audits and make an income. They have no understanding of the laws, nor the practical applications of the PSA, Loan Purchase Agreement, etc.

    Here in CA, there is one problem with your approach concerning the QWR. If I contact the servicer with a QWR, I become a foreclosure consultant and therefore subject to DRE regulations about upfront fees. I cannot keep my business going without payment upfront, so QWR’s are out of the question.

    Additionally, homeowners who come to me usually are within days of the Sale date, so there is not enough time to gather the QWR.

    Outside of that, I provide everything now, including Securitization Agreement analysis. This is proving to be a great tool. I also do a complete Chain of “Official Title” and then show the Chain of the Note that was not assigned.

    My audits have continued to grow in complexity as new strategies come to the forefront.

    I no longer refer to the Audit as a Forensic Audit, instead it is a Predatory Lending Audit. The purpose is to let people know that there is much more to an audit than TILA/RESPA. In fact, I advise new attorneys that if they are just going to argue TILA/RESPA, then they should have the clients to start packing their household goods.

    Best results in the courts here are showing fraud and predatory lending.

    Patrick Pulatie
    Loan Fraud Investigations

  7. This answer is for Ian, question posted on Sept 22 2009,
    Overall Mortgage Portfolio for the fourth quarter 2008: is Prime 67% – Alt A 10% – Subprime 9% (Only). Other 14%.
    Mortgages in the portfolio, that is, on an overall portfolio basis, of government guaranteed mortgages.
    Three categories of mortgage creditworthiness of borrowers’ credit scores at the time of origination:
    Prime—660 and above.
    Alt-A—620 to 659.
    Subprime—below 620.

    But here is the scary statistic information :
    Seriously delinquent mortgages, defined as mortgages that are 60 or more days delinquent plus loans to bankrupt borrowers who are 30 or more days delinquent, increased to 4.60 percent of the total portfolio in the fourth quarter of 2008 from 3.54 percent in the third quarter of 2008.

    Seriously delinquent mortgages increased across all loan categories during the fourth quarter of 2008, continuing the trend reported in prior quarters.

    Serious delinquencies were highest for subprime loans at 16.40 percent and lowest for prime loans at 2.40 percent, reflecting the higher overall risk profile of subprime loans.

    Prime loans experienced a significant increase in serious delinquencies, increasing from 1.67 percent in the third quarter of 2008 to 2.40 percent in the fourth quarter—an increase of nearly 44 percent !!!!!

    Hope this help, >> Victor

  8. Hello Neil- thanks for the quick response to my question regarding % of securitized mortgages, If you have time to help me out on the remainder of those questions I sure would appreciate it. Also, after all the congratulatory comments posted here especially the one from Brown, Brown & Brown (i think) I will be requesting an audit?review?analysis as soon as I can locate all my documents. While I am current on my two mortgages, the amound of illegal fraudulent unconscionable horrors I was subjected to “sticks in my craw” . I want blood, and think I am entitled to it. You will find my situation interesting, I think, having discovered your website about 1 year ago and reading everything. I can’t make this stuff up, and now it’s history, so there it is. Looking forward to it, Again, a profuse thanks for all you have done here. Regards, Ian

  9. Ian: By all accounts it looks like no less than 94% were securitized.

  10. brokenglass: it’s easy to give up. Don’t. Keep pushing. The tide is turning out there in the courts and in the press.

  11. I agree with most of what Mr Garfield has said except for the fact that any type of “analysis” should be performed by a specially trained legal professional.

    A mortgage is nothing more, nothing less than a contract, and like any other type of dispute handled by attorneys on a daily basis where a contract is involved, the very first thing any competent attorney asks his client to bring in is a copy of their contract for review. These “contracts” NEED to be reviewed for contract defenses, because tortuous conduct produces punitive damages, which bring about positive settlement agreements for the borrower. This is why it is malpractice for an attorney to only provide loan modifications, because they have an ethical obligation to review a borrowers paperwork for contract defenses.

    I have have seen samples of most of the “audits out there, most are performed by non-attorneys who have no legal acumen, and are unqualified to analyze for contractual problems; or if they are attorneys, they lack the “special” knowledge necessary, and don’t provide the contract analysis and forensic appraisal needed in every review of a borrower’s paperwork.

  12. Audits preditory fraud asset back sec note deed trustee sale liars loans who cares anymore! I can’t fight this crap! anymore nobody get it and everyone one that does has been kicked to the curb like an old dog! I was an american that use to believe in the law and right from wrong doing the right thing..Blah Blah this is the most evil place on earth! Thanks for nothing Obama,Bush,Regan and all this government leaches that sucked us all dry. The glass is empty I think its very clear that G_D has turned away from this. Oh and too all those that there part was a little lie? there is nothing little about what you have done to us! thank you all that truley cared about the people who were distroyed over audit showed me just how bad it is to be prey.

  13. Neil- I hope I have a better chance of getting an answer from you ont this pos as opposed to other posts on your website. Question: are 95% of mortgages securitized, or 19% or what? Although your comments regarding this issue were a year apart, which is true today? And could you (or anyone) who has studied Bloomberg Pro or ABSNET or SECinfo tell me: the number of us mortgages outstanding, the aggregate amount of all mortgages, what percent are “subprime” what percent are prime, what percent are ALT A etc, This would help me (and many others) get a handle on the overall picture. Thanks, I will be in touch. Regards, Ian

  14. Neil,

    As a consumer trying to save my home I appreciate your words of caution. Many consumers who find themselves fighting this battle have already tried working with the bank themselves or have paid a loan modification company hard-earned money with no results and no refund! The last thing any of us need is to hire someone to do an Audit only to find out it is not enough to get the job done. Or worse to hire an attorney who does not get it!

    Thank you to all who contribute their wisdom to this site. It is you who are making a difference in so many of our lives even if you never meet or speak to us

  15. Come on, Neil…this is the third or so post like this I’ve seen from your blog complaining about loan auditors.

    You clearly have the audience and inclination, so why don’t you do something besides rant about the loan auditors out there who don’t meet your standards?

    We’re not all hacks! I’ll put my loan audits up for your review anytime, and if I’m doing something wrong, I’d welcome the opportunity to learn from you.

    Why don’t you reach out to some of the loan auditors you’re ranting about and look at their products and help them serve the homeowners better by teaching them what you know instead of ranting about it?


  16. Posted by Karl Denninger in Editorial at 08:34
    Has A MERShole Opened Up?

    Ellen Brown penned an article over at HuffPo that sounds much more definitive than it really is, yet outlines a potential major problem for the secutized loan industry:

    In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure.

    Well, kinda. The entire decision is found here and isn’t quite as represented in that article. Nonetheless, it is significant.

    A bit of background is in order.

    A mortgage is a combination of a promissory note (that is, a promise to pay) and a security instrument. That is, there’s a deed of trust and a debt (the promissory note.)

    State law governs foreclosure and most states require as a matter of statute that these two items remain intact. Further, most states require as a matter of statute (that is, law!) that to foreclose you must present proof that you actually have an enforceable interest. In many cases this requires what is known as a “wet signature” – that is, the actual original signed document from the debtor confirming agreement to be bound to the terms. In addition you must establish ownership of that document – that is, you must show an unbroken chain of assignments from the originating bank to your hand.

    This is where the problem comes in – the originating lender has no standing to foreclose once he sells off the mortgage. He was paid in full and thus has no standing to appear in court.

    MERS’ web page says this:

    MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.

    They may as well have said “we have decided that we can abrogate state law with impunity.” Oh wait – they did, didn’t they?

    Sorry folks, life doesn’t work that way.

    If state law requires an unbroken chain of recorded assignments in order to document ownership of a mortgage and thus standing to foreclose, MERS cannot override this state law by fiat.

    Many judges, including some Florida, have held repeatedly that despite the lack of an actual chain of assignments and often despite a lack of actual “wet signatures” on an original promissory note they will evict people from their homes regardless! You have to wonder how many of those judges have been bought, bribed or cajoled by banking interests, given that the purpose of a Judge is to do just that – judge – not write law. If the legislature says you need an unbroken chain of assignments and an original document for it to be enforceable, then it does.

    But in other states banks have run into a problem – judges, rather tired of the “fast and loose” way banks have played with the law for the last decade, have put their foot down and actually done their job – that is, they have judged the facts and enforced the law as written.

    In those locales MERS has run into trouble.

    The underlying issue is that many of these so-called “securities” (MBS, CDOs, etc) were issued “light” of the required legal mandates to keep the chain of assignments and actual consent signatures required for enforcement. Many people charge that the reason behind this was simple volume. I disagree.

    I believe that a large part of the root cause of these “lost” documents is to cover up blatant and in many cases outrageous fraud. It is difficult to prove that a bank or other lender knew and ignored stated-income fraud (or allegedly “investigated” and “underwrote” a file when it did not) when the original file has been turned into ticker-tape confetti courtesy of the closest paper shredder!

    MERS has thus given cover to a tremendous amount of fraudulent conduct – the very conduct that predatory lending statutes, “wet signature” and “chain of title” laws are supposed to prevent.

    The real bottom line here is that securitized bondholders may in fact be holding worthless pieces of paper. My hollering about this began in April of 2007, right when The Ticker began publication, and continued all through 2007.

    The shocker to me is that the bondholders have sat still for this as long as they have. The “delay, extend and pretend” game is all fine and well but all making coupon payments by playing “hot potato” does is hold off on the inevitable. It doesn’t change a thing in terms of the final outcome, because the cash flow to maturity on these notes doesn’t exist!

    There’s liability in silent consent to getting screwed by so-called “technical” legal defects; you can find yourself on the wrong end of a legal principle called “estoppel.” Sucks to be you if that happens, and the “you” in many of these cases are pension funds and others who have a fiduciary responsibility to the final alleged beneficiaries of these “investments.”

    In point of fact all of these fraudulently-securitized instruments – where the inducement to enter into the transaction included representations about credit quality flowing from the alleged original borrowers and security structure are now known to be false – can be “put back” on the originators and securitizers. That bomb winds up coming to rest square on the balance sheet of the big banks as either principals or the “funding and bundling” sources for the gazillions of small “boutique” mortgage shops that have closed over the last two years.

    How long will it be before an enterprising attorney or firm decides to put together a class action with all of the bondholders who are certain to get hosed down the road? Good question. It is in fact one of the mysteries of the present mess that we haven’t seen a significant push in this direction as of yet.

    I still expect that we will, as the potential recovery (and thus the potential legal fees) are literally in the hundreds of billions of dollars.







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