A securitization audit is a legal document that reviews the process of home and commercial loan securitization and searches for fraud per the Securities Exchange Commission Regulations. The document is admissible in court as evidence and is used primarily in foreclosure defense cases where the homeowner feels they have been or will be wrongly foreclosed upon by the trustee of their mortgage loan. A forensic audit of the mortgage loan will look for errors in the loan origination process. Typically these are Truth In Lending Act (TILA) or Real Estate Settlement Procedures Act (RESPA) violations and the fines for these violations are small in comparison to the value of the actual loan.A securitization audit looks at the process of securitization. This is the bundling of hundreds and sometimes thousands of mortgage loans into what is called a “security”. This process, along with the buying and selling of these securities on Wall Street is subject to regulations from the Securities Exchange Commission (SEC). The SEC is a federal commission and ergo, violations are of a federal nature.
In an all too common situation, a Hampton, CT homeowner found himself as just another statistic in the foreclosure crisis that’s sweeping the nation. The Bank Of New York Mellon, as Successor Trustee Under NovaStar Mortgage Funding Trust, filed foreclosure proceedings against his property on April 15, 2011.
After reviewing the evidence provided by the foreclosure defense attorney, including the findings of the securitization audit, the judge for the case ruled to vacate judgment. This is a huge victory for the homeowner and for the nationwide fight against foreclosure. For now, and until NovaStar Mortgage can prove that they own the mortgage note, the homeowner can rest easy and continue to live in his home, without the burden of foreclosure or mortgage payments hanging over his head.
In layman’s terms, the current servicer attempting to foreclose on the property could not effectively show that they own the mortgage note. In addition, the securitization audit illustrated a huge amount of vagueness in the foreclosure process that created reasonable doubt to whether NovaStar had any legal claim to foreclosure on this property.
So, the report provides pertinent data to the homeowner and their legal counsel that helps formulate a plan of action – whether offensively or defensively, and always for home ownership rights. The audit will break down these complex financial transactions into a cogent and transparent report.
That sounds like a pretty good idea, right? Except for two things; many so-called mortgage securitization companies actually do nothing at all but collect a couple thousand dollars from their victims, or they’ll produce an impressive looking set of documents that are actually publicly available and have no legal value. The Federal Trade Commission (FTC) has publicly denounced the use of mortgage audits, even if they’re done properly and legally. A lawyer recent blogged that mortgage audits “are a necessary and essential element to a successful foreclosure defense” and that in every successful case he had handled a mortgage audit and securitization analysis had been “at the foundation of the success.” But he also added: “Let me make it very clear that an audit is not the first step to mounting an effective foreclosure defense.” And he warns that many so-called mortgage auditors provide inadmissible evidence while charging around $2,000 for their service.