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What all documents do we need to review during our due diligence prior to agreeing to purchase consumer residential loans from another bank?
What all documents do we need to make sure we have on file for these loans?There is no regulatory required list of documents required. Your bank has liability for any errors that are obvious on the face of the documents. Consider the loan as if you were originating the transaction. Does Regulation Z apply? Were the TRID loan estimate and closing disclosure provided? Were the disclosures correct? Repeat the process for other applicable regulations such as flood.
If within the contract with the bank we are purchasing the loans from have a warranty agreement on the documents will that protect us should anything not be correct?
The warranty agreement will help but may not provide total protection.
If there is an error on a disclosure the borrower can sue your bank, in addition to the original creditor.. The bank will then have to defend itself, which can involve many thousands of dollars of legal fees. What does does the warranty agreement cover? Does it cover only loan losses? Will it cover damages paid to the consumer? Does it cover your legal fees? Does it reimburse you for the hours spent defending the case?
Most banks conclude that they need to conduct due diligence.
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