Defective refinance procedures create homeowner opportunity

If you refinanced your house within the last three years, you MUST get the escrow documents reviewed by an attorney familiar with  federal Truth in Lending law before the three year statute of limitations expires.  A defect in the notices and/or calculations provided to the borrower at closing can create a defense to foreclosure and a lever to a loan modification.

I sat in a bankruptcy courtroom yesterday watching some 75 homeowners consent to relief from the automatic stay provided by bankruptcy to allow their lenders to foreclose.  I wanted to stand up and shout to the attorneys involved:  have you examined the transaction for Truth in Lending violations?

I examine the loan docs for every refinance my clients did in the past three years and find violations in over 60% of the cases.  The rush to lend money to every home owner resulted in incredibly sloppy procedures (not to mention lending money to people who could never in this life or the next repay the loan).  In those defects lie an opening to save the house.

The statute of limitations for rescinding a refinance transaction involving the borrower’s home is three years.  Get out your loan docs and a calendar and see if there is time remaining to rescind the loan and negotiate a modification.  As the financial situation spirals downward, I expect rational lenders will become more open to modificiations that prevent foreclosure.