Forensic Loan Auditors

As if homeowners in distress with their mortgages, did not have enough problems, they are now being targeted by scammers. “Foreclosure rescue” companies are now using half-truths and outright lies to sell ineffective services to homeowners in distress. According to the Federal Trade Commission (FTC), the latest foreclosure scam is the “forensic mortgage loan audit.” The only ones getting any benefit from these services are the operators selling them.

For an upfront fee of $300 or more, nonprofessionals who call themselves “forensic loan auditors,” or “foreclosure prevention auditors” will “review” your mortgage loan documents. They will try to determine whether the lender complied with mortgage lending laws. They claim that the audit report can be used to avoid foreclosure, to facilitate loan modification, reduce the principal, or even cause the loan to be canceled. Of course they have warm testimonials from grateful clients who saved thousands for the small investment in the audit.

Forensic loan audits are a waste of money. According to the FTC, do not help borrowers get loan modifications or other relief, even if “they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.” A borrower can sue based on errors in loan documents, but such lawsuits do not result in loan modification or cancellation. At best, the plaintiff will recover a small monetary award. A loan that is cancelled does not just disappear like a political candidate with a sex scandal. The money still has to be repaid, or the home is lost.

A legitimate law firm or credit counseling business can help homeowners whose homes are underwater. However, these are the hallmarks of scammers:

• A business that collects a fee before providing services or that demands a cashier’s check or wired funds,
• A business that guarantees to stop the foreclosure process,
• An operator who tells you not to contact your lender, lawyer or credit or housing counselor,
• A company that tells you to transfer your property to it or that offers you a “lease to buy” deal,
• A business that collects your mortgage payments instead of having you pay your lender, or
• A business that offers cash for your house at a price that is not at fair market value.

In general, a company that contacts you offering to cure your mortgage problems probably did some data mining and determined that your mortgage exceeds your home’s value. Avoid these predators. To get help with a burdensome mortgage, contact a reputable law firm or credit counseling service. They will give you an honest evaluation of your circumstances and an objective prognosis.

Do not shy away from consulting an attorney because of the cost. I said in July, 2010, as follows:

If you are thinking that you cannot afford an attorney, it is because you need one! You ask yourself where the nearest restroom is because you feel a biological need to use one (unless you are four, and fascinated by public restrooms like every other four-year-old). You do not wonder about restrooms if you do not have a high-water or excess-cargo problem. The thought that you cannot afford an attorney must have been triggered by the realization that you need an attorney. And if you need an attorney, what you cannot afford is not to consult one.


John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
©2011 John B. Payne, Attorney

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