The American homeowner continues to be victimized in the mortgage crisis. First it was the predatory lenders and unscrupulous loan officers that gave home loans to people who they knew couldn’t really afford them. These people bought into the whole idea that buying a home was part of the American dream to which they were entitled no matter what the cost.
Desperate to save these homes that they could never afford in the first place, these same people fell prey to an entire industry of “foreclosure rescue,” “loan modification” vultures. Under the guise of promising to work directly with the mortgage companies to get loans reduced and to negotiate favorable terms with the lenders in order that the homeowners could remain in their homes, most of these companies simply took upfront fees and either never made contact with the lenders or made initial contact but failed to follow through, much less achieve the loan modification that would enable the homeowners to remain in their homes. The homeowners just ended up poorer and no closer to being able to keep their homes.
As a result of concerted efforts between the United States Federal Trade Commission (FTC) and State Attorney General Offices across the United States, it is now illegal to charge upfront fees for mortgage assistance relief services. You can only be paid a fee if you deliver what you promised and the consumer agrees to a written offer of mortgage relief from mortgage lender. What this joint effort has done in effect is to put thousands of these unscrupulous companies and scam artists out of business. This result, however, comes only after thousands of distressed property owners have paid them for services that they never received.
Despite efforts by lawmakers to stop consumers from being victimized in their desperate attempts to keep their property, the cons continue. The latest onslaught of scams against the consumer is referred to by any number of names, including the “forensic loan audit,” “mortgage securitization audit” or “forensic loan examination.”
Generally the scam occurs something like this: For an upfront fee, which varies depending on the level of the audit or examination that you want, so-called forensic loan auditors, mortgage loan auditors or foreclosure prevention auditors, which may or may not be backed by “forensic attorneys,” offer to review your mortgage loan documents to determine whether your lender complied with applicable state and federal mortgage lending laws. These “auditors” usually input certain data involving your loan into a software program. Based on the outcome of the results generated that are applicable to your loan, these auditors tell you that you can use the audit report to avoid foreclosure, accelerate and facilitate the loan modification process, reduce your loan principal and/or interest rate or even, in the most egregious cases, cancel your loan altogether so that you own your home “free and clear.”
While the finished audit may have many pages which appear to look official and useable, in most cases it is essentially useless. These examinations usually start at $1000 and depending on the tier level you choose could cost more than $2000. This multi-level approach will generally include something to the effect of a “title search,” securitization search and audit and a forensic mortgage audit. Some companies then tell you that for an additional fee, they will use the finished audit to negotiate directly with the lender on your behalf. If this route is not effective, they can put you in touch with a foreclosure defense attorney, who, for yet more money, will be able to use the audit findings to file a lawsuit on your behalf in court.
They usually include pages of boilerplate language that again appears to look legitimate, with the name and the mortgage number inserted in strategically appropriate places. In most instances these audits are not worth the paper they are printed on for numerous reasons, some of which are listed below:
- The analysis fails to breakdown how your payments are itemized and applied to your loan after being received by the lender;
- The person giving you the opinion would not be accepted in a court of law as an “expert” qualified to render an opinion;
- The analysis is flawed;
- The legal analysis may not be applicable in your jurisdiction.
While many of these forensic audits have proven to be useless to consumers, in some instances, there are reputable foreclosure defense attorneys out there who can help. Some do work with securitization auditing companies that develop a useful audit document to be used within the overall legal strategy of the foreclosure defense case. The key is engaging an attorney initially and getting input from your attorney in terms of whether to use a mortgage forensic audit and how it may be useful to you in your foreclosure defense case. Make sure you see a sample of written audit documents. If you see only a pass/fail checklist, don’t bother with that company. Careful written analysis that evaluates the entire mortgage loan process, including the appraisal phase, is critical. Inquire as to how the audits are conducted. Question whether they are simply using the auditing software and plugging in your specific information, or if the audit is conducted by a trained legal professional who is spending actual time examining the documents. Ask the company to give you verifiable information and/or statistics in terms of their outcomes. Make a final decision as to whether you want to engage such a company in consultation with your attorney.
Tips in Spotting a Forensic Audit Scam
- Audit is provided on computer generated paper with Pass/Fail Checklist Analysis
- Performed and sold by persons with no legal training, usually former real estate agents, mortgage brokers or loan processors who simply input data
- Vendors of these services identify themselves as “Certified Loan Auditors.” There is no such legal certification.
- Auditors who make claims that seem too good to be true. If it seems too good to be true, it probably isn’t legitimate.
- Auditors who guarantee favorable mortgage loan term results or guarantee you that they will find problems with your mortgage documents and/or mortgage transaction
- Be skeptical of any high upfront fees
- Beware of any high pressure sales tactics