Imagine the fallout where its is predicted nearly half the nation's mortgage borrowers will owe more on their mortgages than their homes are worth. A Deutsche Bank analysis of the battered housing and mortgage markets estimated that 25 million borrowers, representing 48% of all Americans with mortgage loans, will plunge underwater before home prices are expected to stabilize in the beginning of 2011.

This level of negative equity could compel more borrowers to "strategically" default -- or walk away -- particularly those who are so far underwater that they fear they'll never break even. For example, if your areas home-price forecast is correct, roughly one in two mortgage borrowers and one in three homeowners will owe more than their home is worth. MSoliman, an expert witness and sector analyst cites the recent CNN report as "Dead On".

He notes - according to one of the researchers who authored the report. "That's a dramatic shift from the past several decades when housing was the foundation of middle class wealth."

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Lender Forced Receivership

In a bankruptcy proceeding, under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, obligations under the notes or the subsidiary (GMAC Federal Savings Bank) guarantees could be voided.

Furthermore, claims in respect of the notes or the subsidiary guarantees could be subordinated to all other debts of the debtor or subsidiary guarantors. This holds true if among other things, the debtor or subsidiary guarantors at the time the debt evidenced by such notes or subsidiary guarantees was incurred received less than reasonably equivalent value or fair consideration for the incurrence of such debt or guarantee.

The laws governing fraudulent conveyances or transfers are actually set under two sets of laws that historically are consistent. The Uniform Fraudulent Transfer Act ("UFTA") was adopted by the majority of states.

The second is found in the federal Bankruptcy Code. Intentional fraudulent transfer is something that may be a challenge to prove. Assume for definitions sake it is relative to any transfer of property made by a debtor with intent to defraud, hinder, or delay his or her creditors.

Why a RESPA or TILA Audit Maybe worthless ?

Why is a RESPA or TILA audit worthless ?
* This is according to NLS and the audits they have reviewed. They base this information on the fact the audit does not consider a borrowers true income . The disclosures they allege to audit are based on APR tied to the cost of financing the loan. If the loan is calculated using false income figures as evidenced by the form 1008 the entire set of disclosure documents are rendered incorrect.

What should I look for in my loan file?
· Tough question...even for an attorney.

So where do I start?
· Ask around. Find a loan examiner with underwriting experience. Ask a lender what they will look for today (versus last year) for qualifying a borrower.

What are the most critical documents to review?
· The final 1003 form or application and the form 1008 transmittal.

Why?
· It's funny, but almost every file we see at NLS is absent the final 1003 application and the form 1008 transmittal.

Why is it funny to you?
· A RESPA Audit cannot be of value if the 1003 is wrong and the 1008 is incorrect. If both are wrong you cannot audit any other disclosure documents where they all are wrong.

So what are you auditing?
· The 1008 is the lead disclosure document and the 1003 is a federal document that prohibits any type of fraud. Every document we see from a borrower is from the signing of the loan. Those loan docs are considered final documents. But the final 1003 application and 1008 transmittal are the most important documents to an underwriter or examiner. Yet, they are always missing from the borrower's loan file.

What is the significance for these documents?
· First, a lender will argue equitable distribution of consideration and mutual consent at the time of funding. Both parties signed the documents and both received ample consideration under a fraudulent set of terms and conditions.· Second, the fraud many refer to at signing actually takes place behind the scene long after the loan is signed.

I understand, but what is the real significance of the two items you claim I am missing?
· You did sign the loan documents and you are the maker of the note. The motivation to sign the documents was in exchange for the funds used to purchase or refinance the home you’re in.

And your point?
· The final 1003 may be different than the one you’re presented at closing. And the 1008 is a carefully crafted documented used solely to sell loans into the secondary market. In other words, the final 1003 and 1008 must sing out their song in perfect harmony to allow a loan to be sold later.

So, if the presumption of equitable distribution is true....what’s the difference?
· It's not necessarily true - the rule of equitable distribution. But a lazy lawyer and clueless judge will opt for the arguments and use the rule to fast-forward a decision for their fair haired client or victim defendant, the lender.

And?
· You must differentiate the fraud from consensual error’s and mutual culpability. Try to further evidence the efforts by the lender to perpetrate fraud that are far beyond closing and long after your endorsement of the loan documents and settlement!

Okay, got it. What’s next?


MSoliman
msoliman@borrowerhotline.comhttp://www.foreclosureinfosearch.com/Informational only. Some material assumed by permission. Post comments in accordance with ethical web protocol www.borrowerhotline.com