Foreclosure Scams: Forensic Loan Audits

A foreclosure consultant may try to get you to pay for a forensic loan audit. Here's why it's a scam.

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If you are in foreclosure, you are likely to be contacted by all sorts of companies claiming they can help you avoid foreclosure. All too often, these companies just want your money and the services they offer are scams. One such “service” is a forensic loan audit. 

(To learn about other common foreclosure scams, and how to avoid them, see our Foreclosure Rescue & Other Scams topic area.)

What Is a Forensic Loan Audit?

A forensic loan audit is where, for an upfront fee of several hundred dollars, a so-called forensic loan auditor will review your mortgage loan documents to determine if your lender complied with the law.

Companies offering this type of service often claim that the audits find lender violations 90% of the time. They further claim that, if a forensic loan audit finds violations of the law you can use the results to:

  • stop a foreclosure
  • force the lender to give you a loan modification, or
  • rescind (cancel) your loan.

Forensic Loan Audits Are Not Effective

In fact, there's no evidence that forensic loan audits are effective in accomplishing any of these things.

First of all, the “audit” is typically completed by a processor who simply plugs information from your loan origination documentation into loan compliance software, which then supposedly identifies violations and compiles them into an automated report. Secondly, in most cases, only minor violations are found.

Even if the audit does find fraud, predatory lending, or other significant violations of state or federal law, you would need to file a lawsuit (either as an answer to the lender’s judicial foreclosure complaint or as your own lawsuit if in a nonjudicial foreclosure) against the lender to stop a foreclosure. Sending a copy of the audit report to the lender or telling them that you had a forensic loan audit done will have no effect.

To learn about legitimate options for avoiding foreclosure, see our Foreclosure Alternatives topic area. To learn about government loan modification programs, visit our Government Foreclosure Prevention Programs topic area.

 

by: , Contributing Editor

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