What is the likelihood that a forensic audit will reveal a regulatory violation?
There is a very reasonable possibility that a given mortgage transaction materially violates one or more consumer protection laws. The mortgage industry’s struggle to comply with consumer protection laws is nothing short of staggering. A remarkable report published by the inspector general for the FDIC reveals that 83% of federally supervised banks that made loans at the peak of the mortgage boom were cited for patterns of “significant compliance violations.” The FDIC regulates banks that generally did not engage in subprime lending and that are required to have minimum regulatory controls in place. The percentage of lenders failing to comply with regulatory requirements is even higher for state-licensed, non-bank lenders—such as Ameriquest, New Century and Option One—who were responsible for originating 52% of subprime mortgages and are subject to a much broader patchwork of state regulation.
