Loan Portfolio Errors May Trigger Law Suits
(Los Angeles) A recent New York Times article cites the potential for class action lawsuits by borrowers who have been overcharged on their mortgage statements.
The article quotes the president of a nonprofit mortgage auditing firm with an ominous-sounding name who claims to have found errors in excess of $5,000 in 18% of the loans submitted by borrowers for review. One loan was off $22,000, another $32,000!
The errors took many forms, including bookkeeping and computer mistakes, adjustable-rate loan miscalculations, incorrect prepayment credits and oversized escrow accounts. When unearthed, borrowers are encouraged to pursue refunds.
Most foreboding is that the firm reports finding mistakes in half the adjustable-rate loans and 13% of the fixed-rate loans they were asked to audit, and 21% of all escrow accounts examined were holding too much money. How long do you think it will be before some ambitious attorney orchestrates a grandstand class-action lawsuit with the media playing first violin?
Even home equity loans are not exempt. Sixty three of one hundred equity loans examined contained errors. While the discrepancies were smaller, ranging from $300 to $700, that will surely not stop some borrowers from seeking legal redress.
How many of these errors is your loan servicing system prone to? While it is unlawful for you go after a borrower for an undercharge, the legal system provides ample opportunity for overcharged borrowers to come after the lender.
Loan errors that favor the borrower can have a significant negative impact on portfolio performance as well. We recently installed a PC-based system for a bank that discovered a $17,000 undercharge on a commercial loan the first day the new system was operational. Shortly after an electronic conversion for a consumer lender, over one hundred mortgages that would not have adjusted interest promptly were uncovered. That lender saved more than the investment in the new software the first month!
Your best protection against charging too much or too little is a loan servicing system that automatically knows what's correct. The most critical element is the software driving your system. And nobody knows more about helping lenders enhance loan portfolio performance than us.
LOANLEDGER is a sophisticated but affordable PC-based loan servicing software system that is easy for your people to learn and use. It reacts promptly to interest rate shifts, so when the Fed intervenes in the market, you can react quickly to ensure your loans are adjusted correctly. Both you and your borrowers are protected.
Why risk potential lawsuits or lost revenues because of an outdated loan servicing system or software that can't keep pace with changes in your environment? Call us today and ask for a demo of LOANLEDGER.
We'll put you back in control of your portfolio.
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