The DirtLaw Blog

Mortgage Fraudsters Sentenced to 23 Years.

It took a long time, but after years of both criminal and civil litigation, the criminal case is finally coming to a close.

"Santa Clara County Superior Court Judge Vincent Chiarello sentenced Esperanza Valverde, 41, to 23 years and 8 months, and her husband, Herman Covarrubias, also 41, to 19 years and 8 months in prison. The couple was ordered to pay more than $900,000 in restitution to victims."

Full text here.

Among other dirty deeds, the shop that Covarrubias was running, Summit Mortgage (out of Milpitas) was accused to have supplied lenders with false tax returns, W-2 statements, pay stubs and employment verification letters.

It's no secret that underwriting over the years has been sloppy during the good times, but even the most lenient mortgage brokers shied away from outright forgery. 

The borrowers defaulted on the outrageous loans and some lost their homes.  How did the lenders fare?

"The banks were BNC Mortgage, which was shut down by Lehman Brothers before Lehman collapsed last year; Argent Mortgage and World Savings, which were acquired by other companies; GE's WMC Mortgage, which shut down in 2007; and Downey Savings, which was seized by regulators last year."

Having seen some of the loan docs, the question in my mind is what did the lenders think when they received a loan application where a blue-collar worker had a 6-figure salary?  I am not blaming the lenders for being defrauded, but I do think better safeguards should have been in place on the lender side as well.

Past Litigation is a Material Fact that Sellers are Obligated to Disclose By Julia M. Wei, Esq., Law Offices of Peter N. Brewer

In California, sellers have a legal obligation to disclose any material facts affecting the desirability of the property.  This duty is not only rooted in the common law, but statute as well, codified by California Civil Code Section 1102 et seq.  The sellers must complete the Transfer Disclosure Statement (“TDS”) and certify the information in the TDS.  Additionally, many organizations such as the California Association of Realtors® (C.A.R.) or the PRDS® Forms offer a Supplemental disclosure form as well for sellers to complete.

What should the Seller write on the TDS? Well, anything that affects the value or desirability of the property in the mind of a reasonable purchaser.  A common fact pattern that real estate litigators like myself often see is one where the seller of residential real estate has made a repair or a fix and fails to disclose the repair to the buyers.  The sellers take the position that the leaky roof/window/plumbing was repaired and so they had no reason to inform the buyer of the repair as the sellers no longer felt the property had a defect.  The buyers who are confronted with the leaky roof/window/plumbing (that apparently didn’t get fixed!) often feel that the sellers intentionally concealed the defect as any repair of water damage usually requires new paint or other cosmetic measures to address the water damage. 

 

When the sellers fail to disclose a material fact, and the buyer brings suit against them, this type of case is often referred to as the “bad house” case.  As most real estate purchase agreements contain mandatory mediation provisions, and many purchasers tend to initial the arbitration provision, much of the recent law on "bad house" cases is played out in a private forum with a private judge (arbitrator).  As attorneys, we are left with an older body of caselaw to extrapolate from about whether something is “material” and should be disclosed.

 

Accordingly, the recent case of Calemine v. Samuelson (Cal.2d February 17, 2009; B194461) was met with much attention in the real estate world as it was an opportunity to read an appellate decision regarding a “bad house” case.

 

Defendant Samuelson had purchased a condo in 1983.  In the nearly twenty years that he owned it, the condo had intermittent water intrusion and flooding.  He, along with some of his neighbors sued the developer.  Waterproofing and repairs were made in 1992. 

 

Apparently, when Samuelson sold his condo to Mr. and Mrs. Calemine in 2002, he filled out the Transfer Disclosure Statement and checked the box indicating he was aware of “Flooding, drainage or grading problems” and then added further, “Heavy rains below ground walls & slab.” [sic]

 

Samuelson also informed the buyers (perhaps verbally, as it is not clear from the record), there had been water intrusion and water damage in the past but that there had been extensive repairs that had solved the problem.  Samuelson did NOT disclose the two lawsuits.

In 2005, the condominium garage flooded twice, and twice more in 2006.  The Calemines sued Samuelson and the Homeowners Association and others, for nuisance, breach of contract, negligence and misrepresentation and concealment. 

 

Samuelson brought a motion for summary judgment at the trial court and prevailed but the Calemines took it up on appeal and the Appellate court concluded:

“…it is undisputed that Samuelson sufficiently disclosed the existence of the water intrusion itself.  He even urged the buyers to get their own inspection.  He failed however, to tell the buyers about the two lawsuits which had been filed.” 

 

The buyers testified (by declaration) that they would not have purchased the property if they had known about the prior lawsuits.  The Appellate court concluded there was a triable issue of fact regarding whether Samuelson was obligated to disclose the two lawsuits.

 

What this case illustrates is that when a seller makes the judgment call about what is material to the buyers, it can backfire.  It is what the buyer feels affects the desirability and value of the condominium that gives rise to a legitimate dispute. 

 

Here, the seller clearly disclosed the defect itself, but failed to disclose that the defect (water intrusion and flooding) had been so severe as to warrant two lawsuits from the owners.  Had the buyers known, they could have reviewed the pleadings and discovered that the repairs were possibly insufficient.  With that information, the buyers could have either backed out of the transaction with a justified excuse or negotiated a deeper discount or repair credit.  Seller’s failure to disclose the lawsuits removed that choice from buyers.

Collecting on the Deficiency Judgment.

Below is an excerpt of an article that was published in the Winter 2008 Points of Interest for California Mortgage Broker Association members:

Sold Out Junior Lienholder With a Deficiency Judgment? Now It’s Time To Collect
by Julia M. Wei, Esq, The Law Office of Peter N. Brewer

If you were the prevailing party, the attorney who handled your litigation will usually prepare and record an Abstract of Judgment for you.  However, that is as far as their collection efforts often go.  It is then up to the judgment creditor to engage a collection specialist to enforce the judgment against the judgment debtor.

1.  The Sit and Wait Method Recording an Abstract of Judgment is a passive means of judgment enforcement.  It is a lien against the debtor’s real property in a particular county.  Accordingly, if the debtor owns property in multiple counties, a creditor should have multiple Abstracts of Judgment issued by the Court and record them in all the counties the debtor is believed to own real property.

TIP Abstracts are good for as long as the Judgment.  A judgment expires after 10 years if not renewed.  Accordingly, if the creditor knows the debtor has relatives that he or she may inherit real property from, the creditor should also record in that county because the abstract of judgment will attach to the new property at the time the conveyance.  The creditor should also set up a calendaring reminder to RENEW the judgment in a timely fashion.

Back in the heyday of refinance loans, creditors were often paid because the debtor eventually would take some equity out of their home and the new loan paid off the liens.  These days, that scenario is less likely.

Additionally, abstracts can be lost to foreclosure, wiped out by the senior lienholders, or expire after 10 years. Judgment creditors may want to be more aggressive. 

 

2. Examining the Debtor and Taking the Money Out of Their Wallet A judgment creditor can have the Court issue an Order to Appear for Debtor’s Examination (OEX) and serve post-judgment discovery regarding the debtor’s financial accounts. 

Service of the OEX and post-judgment discovery is also a way to get the Debtor to start calling the creditor, rather than the Debtor avoiding the creditor’s phone calls.

The OEX is challenging to execute because it must be personally served on the debtor and the debtor may be an expert at dodging service.  However, assuming service is accomplished, two things could happen.  1) the debtor could appear; or 2) the debtor could fail to appear and the Judge can issue a bench warrant.

TIP   If the debtor does appear (the OEX is conducted at the courthouse), then creditor’s counsel can slap a Turnover Order on the debtor and get whatever assets are present that day – i.e., debtor’s watch, car, cash in their wallet. 

3.  Seize Their Car and/or Boat This only works if the debtor actually owns their car.  However, once you have a judgment, you may also have grounds to have a licensed personal investigator make inquiries of the DMV records.  The first step in any seizure is to obtain a Writ of Execution from the Court after the asset report is obtained from an investigator.

The seizure method is costly but effective.  Seizure of personal property requires the Sheriff to get involved, and requires up front deposits with the Sheriff’s department.

TIP When the car is garaged, the creditor must obtain a seizure order that allows the deputy to enter private property (garage or marina) to seize the vehicle.

FOR THE FULL TEXT - GO HERE.

Defending Against the "Foreclosure Defense" lawsuit.

There's a new litigation trend we've been seeing in California - the rise of the "foreclosure defense" lawsuits.

Basically these lawsuits allege that the lender no longer owns the original promissory note and therefore cannot foreclose on the borrower's property.  Of course, to keep things interesting, the lawsuit alleges all manner of violations of any lending statute they can think of from TILA to RESPA to HOEPA and the Fair Debt Collection laws.

Additionally, the mortgage broker, the appraiser and even the Realtor are roped in as defendants.

In short these cookie-cutter lawsuits are  sham lawsuits intended to extort a few more months of free rent.  The very nature of these lawsuits is offensive to law-abiding citizens who pay their bills. 

Instead, these plaintiff-homeowners in the "foreclosure defense" lawsuits have been misled by foreclosure defense gurus to believe they should be entitled to own the house "free and clear" despite not having paid off their mortgage loan.

This smacks of the same rhetoric the Mortgage Elimination folks used a few years back.  Of course, the perpetrators of the Dorean Group mortgage elimination scheme were both sentenced to over twenty years imprisonment.

The law does not support the theories espoused by these new foreclosure defense gurus and early law and motions efforts are key in discouraging these lawsuits.

Guaranty, Guarantee, Potato, Potahto…

For many private money investors (or hard money lenders as they are sometimes referred to), a loan to an LLC alone carries too many risks.  Accordingly, a personal guarantee from the managing member or other members of the LLC with collateral will be required.

 

Since the underlying loan obligation to the LLC was secured by a deed of trust against real estate—and the real estate values have plummeted, we are seeing a rise in the number of lawsuits by lenders against guarantors to enforce of the guarantee agreements.

How do California’s anti-deficiency provisions protect guarantors?  They don’t.  Well, not exactly.

In the seminal case of Union Bank v. Gradsky, the court first enumerated the Gradsky doctrine and found that while the legislature did not intend for anti-deficiency statutes (California Code of Civil Procedure Sections 580(b) and 580(d)) to protect guarantors, that the doctrine of estoppel prevented lenders from going after the guarantor once the lender had already foreclosed on the collateral.*

 

The reasoning was that once a guarantor pays the debt of another, the guarantor assumes the rights of the lender/creditor and should be entitled to pursue the borrower to recover the losses.  Accordingly, if the lender has already foreclosed on the collateral, they have prevented the guarantor from going after the collateral and harmed the guarantor by altering the position of the parties from the time of the bargained for guarantee.

 

Accordingly, most savvy transactional lawyers who draft guarantees will include contractual Gradsky waivers as enumerated by Civil Code Section 2856 which states:

 

§ 2856. Waiver of suretyship rights and defenses; contract language; effectiveness; applicability; validity of waivers executed prior to January 1, 1997

(a) Any guarantor or other surety, including a guarantor of a note or other obligation secured by real property or an estate for years, may waive any or all of the following:

(1) The guarantor or other surety's rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to the guarantor or other surety by reason of Sections 2787 to 2855, inclusive.

(2) Any rights or defenses the guarantor or other surety may have in respect of his or her obligations as a guarantor or other surety by reason of any election of remedies by the creditor.

(3) Any rights or defenses the guarantor or other surety may have because the principal's note or other obligation is secured by real property or an estate for years. These rights or defenses include, but are not limited to, any rights or defenses that are based upon, directly or indirectly, the application of Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure to the principal's note or other obligation.

(b) A contractual provision that expresses an intent to waive any or all of the rights and defenses described in subdivision (a) shall be effective to waive these rights and defenses without regard to the inclusion of any particular language or phrases in the contract to waive any rights and defenses or any references to statutory provisions or judicial decisions.

(c) Without limiting any rights of the creditor or any guarantor or other surety to use any other language to express an intent to waive any or all of the rights and defenses described in paragraphs (2) and (3) of subdivision (a), the following provisions in a contract shall effectively waive all rights and defenses described in paragraphs (2) and (3) of subdivision (a):

The guarantor waives all rights and defenses that the guarantor may have because the debtor's debt is secured by real property. This means, among other things:

(1) The creditor may collect from the guarantor without first foreclosing on any real or personal property collateral pledged by the debtor.

(2) If the creditor forecloses on any real property collateral pledged by the debtor:

(A) The amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.

(B) The creditor may collect from the guarantor even if the creditor, by foreclosing on the real property collateral, has destroyed any right the guarantor may have to collect from the debtor.

This is an unconditional and irrevocable waiver of any rights and defenses the guarantor may have because the debtor's debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.

(d) Without limiting any rights of the creditor or any guarantor or other surety to use any other language to express an intent to waive all rights and defenses of the surety by reason of any election of remedies by the creditor, the following provision shall be effective to waive all rights and defenses the guarantor or other surety may have in respect of his or her obligations as a surety by reason of an election of remedies by the creditor:

The guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

(e) Subdivisions (b), (c), and (d) shall not apply to a guaranty or other type of suretyship obligation made in respect of a loan secured by a deed of trust or mortgage on a dwelling for not more than four families when the dwelling is occupied, entirely or in part, by the borrower and that loan was in fact used to pay all or part of the purchase price of that dwelling.

(f) The validity of a waiver executed before January 1, 1997, shall be determined by the application of the law that existed on the date that the waiver was executed.

 

A lender has a few choices when they are faced with going after collateral with declining value and a loan guarantee.  The lender can 1) conduct a non-judicial foreclosure and walk away from the guarantee; or 2) conduct a judicial foreclosure and sweep in the guarantee claims and name both the borrower and the guarantor; or 3) go after the guarantor for the entire amount owed.

 

Additionally, if the guarantee contains all the necessary waivers, the lender can both non-judicially foreclose on the collateral and go after the guarantor for the deficiency owed.

 

*The court also reiterated that the “one-action rule” (C.C.P. §726) did not apply to  guarantees.   

Lis Pendens - What Is It and How Does it Affect Title?

I recently wrote an article for the Foreclosures.com newsletter, October 2008:

Excerpted:

 

In California, the purpose of the Lis Pendens is to give constructive notice to the public at large that this property has a lawsuit pending that could affect whether or not the owner of record has the right to sell it, put it up as collateral for a loan or otherwise transfer it.  The technical aspects of filing and recording Notice of Pendency of Action are enumerated under §§405–405.6 of the California Code of Civil Procedure. 

 

As recently as 2004, the California Supreme Court concluded that Code of Civil Procedure section 405.20 provides that, “a lis pendens may be filed by any party in any action who asserts a ‘real property claim’…(Kirkeby v. The Superior Court of Orange County (2004) 33 Cal.4th 642.) In that particular case, the plaintiffs had alleged a fraudulent transfer of the property had occurred. 

 

Any investor planning on acquiring or lending against a property with a recorded lis pendens needs to do careful investigation. At the bare minimum, the investor should obtain the operative court pleadings. The lis pendens should contain the case number and the county the action is filed in, as well as the names of the parties.    Some counties like Alameda county and San Francisco county make their court documents available online for instant access and without charge. 

 

=========================================

 

Click HERE for the full text of the article, or please visit: http://www.brewerfirm.com/article-LisPendens.html

 

 

More New Foreclosure Legislation

As I predicted last year, more legislation is flooding in.  Two days ago on July 30, 2008, The President signed H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act, which as near as I can tell, is also called the Housing and Economic Recovery Act of 2008. 

The most interesting part of the bill for me is the claims that the bill:

"Expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government-insured mortgages they can afford to repay. 

·        Protects taxpayers by requiring lenders and homeowners to take responsibility.  This is not a bailout; in order to participate, lenders and mortgage investors must take significant losses by reducing the loan principal.  In exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government.

·        Contains critical protections for taxpayers’ dollars, including higher refinancing fees that establish a new FHA reserve to cover possible losses from defaults on these government-backed mortgages.

·        Only primary residences are eligible: NO speculators, investment properties, second or third homes will be refinanced."

In reading the summary, I learned that the FHA insured loan can be up to 90% of the present value of the home.  I believe I read somewhere that the FHA loan limits are capped at $625,550.

While the bill obviously has good intentions, I find myself wondering how the logistics of such a "rescue" would work.

Hypothetically, Homeowner John & Jane Smith bought a house in Nov. 2006 in San Jose, California with a purchase price of $750,000.00.  They did a 5/15/80, so they made a downpayment of $37,500.

Their two loans were $600k and $112,500, with the smaller of the two loans being a fixed and the larger loan having a low teaser rate that adjusted and a 2 year pre-payment penalty.

Now the house in August of 2008 is worth about $600,000.00, and the loans exceed the value of the house by $112k.  How does the HOPE rescue work?

First, the Smiths have to be owner-occupants to qualify. Next, their lender has to agree to modify the loan. Well, there are 2 lenders, so this can be a logistical nightmare.  The senior lender has $600k, and they are out at 100% LTV (loan-to-value). 

The FHA loan that the Smiths would want to re-finance will go to 90% LTV, which means the FHA loan is capped at $540k.  The senior lender has to take a $60k discount and waive its prepayment penalty, the junior lender has to agree to take a 100% discount. 

How feasible is this rescue package?  I have seen many short sales fall through because the junior lender will not take a discount.  Occasionally, the senior will also refuse to waive the pre-payment penalty. 

How successful will this new loan be for the homeowner?  At $540k, with perhaps a 7% loan, 30 year fixed, fully amortized, the monthly payments would still be $3,600.

How motivated will the homeowner be to do this, when they know that they must share the future appreciation with the lender who discounted their loan?

If the homeowner walked away and took the one-time hit, they could be renting a house for $2500/mo. in San Jose.  Which choice do you think the Smiths will make?

The Federal Reserve Board Amends Reg Z and California Passes SB 1137

The newspapers today were filled with headlines that the Fed was curbing "shady lending" practices.  Of course, these articles were a little vague on what the name of the regulation was and what date these rules would go into effect.

Going straight to the horse's mouth, I learned that the Fed is amending Reg Z to deal with "higher-priced mortgage loans" in the following manner:

"The final rule adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling.  For loans in this category, these protections will:

• Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value.  A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice."
• Require creditors to verify the income and assets they rely upon to determine repayment ability.
• Ban any prepayment penalty if the payment can change in the initial four years.  For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
• Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans. "

It goes into effect October of 2009.

And that's just the federal amendment.  California's Senate Bill 1137 passed on July 8, 2008--EFFECTIVE IMMEDIATELY.  The legislation requires lenders and mortgage loan servicers to: 1) contact borrowers about restructuring options before beginning the foreclosure process, 2) requires a 60-day notice to be given to tenants of buildings facing foreclosure before they can be removed from a rental housing unit; and 3) allows fines of up to $1,000 a day for owners of foreclosed properties that fail to adequately maintain them.

And folks...I think there is more legislation to come.  I have been a bit baffled by S.B. 1137 because while it makes a lot of sense to increase communcation with borrowers and work out a loan modification (I often do this for junior lenders) it doesn't make a lot of sense to prolong the f/c process by another 30 days. 

Often if a borrower is trying to walk away--no loan modification would give them an incentive to pay because they do not want to pay a mortgage on a house worth less than the mortgage.  Thirty more days simply delays the inevitable--and prolongs our economic slump. 

Mortgage Pool in Bankruptcy - What Can Investors Do?

For those of monitoring the Cedar Funding implosion, it was not surprising to see that Cedar Funding, Inc. filed for Chapter 11 bankruptcy last week.

Cedar Funding is now a Debtor-in-Possession (DIP), and no doubt David Nilsen will seek to remain in control of the organization, and avoid the receiver recently appointed by a California Superior Court judge. 

What can creditors do?

In cases of fraud or wrongdoing, creditors can seek to appoint a Chapter 11 Trustee.  This would prevent the DIP (in this case Nilsen) from having ongoing control and management of the business.  However, many creditors should recognize that there is a cost associated with this, much the same as having a receiver in place.

Additionally, for unsecured creditors, the US Trustee will circulate a request that a creditor's committee be formed.

All of these steps are to part of evaluating the DIP's ultimate plan for reorganization.  The committee has voting rights, and in addition to the Trustee can object to a plan that is unlikely to be successful or in the best interest of creditors.

More aggressive steps? Creditors can determine if they should bring a motion to convert the bankruptcy to a Chapter 7.  Upon a conversion, the bankruptcy estate is controlled by the Chapter 7 Trustee and the goal of the Chapter 7 is a liquidation of assets rather than an a "re-organization."  While it can seem draconian, in reality, most Chapter 11 bankruptcies fail and the sooner the debtor liquidates, the higher likelihood of some recovery before the estate is eaten away.

How can a creditor decide?  A DIP has the obgliation to prepare operating reports and in this case, the operating reports may be more detailed than the reports that the investors may have sporadically received in the past.  The failure to supply these reports can be an indication that there is something to hide or that the debtor lacks the ability to satisfy the requirements of remaining in a Chpater 11 bankruptcy.

At a bare minimum, creditors will need to prepare their proof of claim and can decide to take a wait and see approach.

Private Money Investors Beware

Here in Northern California, we are all just wrapping up the mess that California Plan, Inc. made.  Michael Schneider was convicted and only recently sentenced.  He stole over $40M from investors, and was sentenced to 28 years.  Schneider's fraud was typical in that all investors claimed Schneider had their trust and was like family to them. 

Now the Cedar Funding fiasco in Monterey has surfaced.  Cedar Funding is a $70M+ fund, and the principal, David Nilsen, has been accused of running a giant Ponzi scheme, loaning money to insiders, (ie, himself to purchase his $4.2M posh home).  The DRE has suspended his license.  The Court has appointed a receiver to manage the fund and the DA is investigating.  Again, investors are saying that they trusted Nilsen.  The Montery Herald article says it all:

Nilsen was a member of her church, she said, and he instilled her with a sense of trust.

"I thought, 'This man is a God-fearing individual who would take good care of my money,'" said Abraham-North. "But he did not — he left me penniless."

The schemes fraudsters like Schneider use are not particularly creative.  Schneider was simply cutting and pasting investor names onto a Deed of Trust to make it look like it had been recorded for the investor.  In reality, Schneider photocopied investor names and glued them over the actual secured parties' name.  In this manner, he was able to make it look like the investor was secured when in fact, the Deed of Trust with their name was forged.

Additionally Schneider would not tell investors when their loans had paid off.  Instead, investors received their monthly interest payments for years, never realizing the borrower had re-financed and paid off their loan years ago.  Often, Schneider would tell investors after a payoff to leave their money in his trust account and he would "roll it over" into the next loan to allow them to continue to earn interest on their money.

How does an investor protect his or herself from this? 

Regardless of how trustworthy and conscientious a broker is, the investor must safeguard their financial future and take charge of their loan portfolio. If the investors had simply asked Schneider for the originals of their Deed of Trust, half their problem would have been eliminated. 

Additionally, a random spot check/audit of your Deed of Trust investing portfolio is never a bad idea.  You can search county records to see if your Deed of Trust has been reconveyed.  If it has, but you never received the payoff funds--you've got a problem.

Lastly, complacency puts the investor at risk.  If your loan pays off--take the money.  Wait for your broker to bring you the next investment opportunity and re-invest your money.  Losing out on a month of interest can spare the investor the heartache of losing the whole enchilada.

For investors in mortgage pools or collateralized mortgage obligations--you are entitled to monthly accountings.  If you are uncomfortable about not knowing the percentage loans held by insiders, hire an independent auditor to help you ask the right questions and get the right documentation from the fund manager.