Origination fraud recourse

Posted by greggc on October 20, 2008 at 21:01:35:


A friend took out a $120K equity line in 2006 at what the originating lender (E-Loan) determined was 80% combined loan-to-value. My friend says that an appraisal was not done, that the E-Loan telephone rep. did a very quick AVM and decided the property was worth $685,000. My friend states that it was tax-assessed then at closer to $500,000 but allowed the E-Loan rep. to use the $685K valuation so as to get a lower rate (prime +0).

My friend's income also was never verified...she specifically remembers asking if she needed to fax a W2 and/or paystub and the rep. responded that based on her high credit score that this wasn't necessary.

At the time my friend had a $380,000 1st mortgage making the real combined loan-to-value 100% from day one.

To make a long story short(er), my friend is now upsidedown in the property and she feels as if guilty as hell that she allowed this large of an equity line to be placed. Also, the 1st mortgage is adjusting in May and the PI will increase by close to $1000/month, which she cannot afford.

Does my friend have any standing to seek forgiveness of any of the equity line debt as it was, in my opinion, extremely irresponsible for E-Loan to allow this large of a equity line without doing an appraisal and/or verifying her income??

Thanks so much.

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