This is a guest post from our partners at Housing and Economic Rights Advocates in Oakland.
Forensic Loan Audits—What Are They? Should I Pay For One?
A “forensic loan audit” is a term that is being used to refer to someone looking over a homeowner’s loan documents in order to determine whether there is anything legally wrong with the loan. Companies and individuals that advertise this service promise to provide a written report of these legal violations, and that report is supposed to help the homeowner get a better loan modification or find an attorney who will file a lawsuit on behalf of the homeowner.
The problems with these audits are:
(1) The audits are frequently poorly done, with very little information in the audit report about what was wrong with your loan. The audit reports usually have a lot of canned, standard language that appears to be cut and past from one report to another and does not help you, the homeowner, very much.
(2) Audits are not always performed by attorneys, or the attorney involved does not have much experience in the area of mortgages, consumer rights, or mortgage fraud. As a result, the audit report can be inaccurate and a complete waste of money.
(3) Showing an audit report to a mortgage lender or servicer is not usually enough to get a loan modification. If you have real legal problems with the loan, you will need an attorney who is willing to work with you for the weeks and perhaps months it will take to get a positive outcome.
(4) Some legal problems with documents are not strong enough to pressure a lender or servicer into providing a loan modification. The people who prepare audit reports do not tell you that.
(5) Forensic loan audits are expensive – $1500 and more.
(6) You may be able to get legal assistance for free from Housing and Economic Rights Advocates (HERA) at 510 271-8443. Call for intake hours.
(7) You can get FREE LOAN MODIFICATION ASSISTANCE from HUD-certified housing counseling agencies. Visit HUD’s website to find the offices closest to you, at http://www.hud.gov/local/ca/homeownership/hsgcounseling.cfm
One more thing: This past year, a new law was passed in California that prohibits anyone – including attorneys, realtors and brokers—from charging or collecting any money from consumers for loan modification work until that work has been completed. If the forensic loan audit is being offered as a way to help you get a better modification, then the person or company offering this service cannot charge you money up front for this service.
For a list of places you can complain to if you have been defrauded, visit the following website of the California Department of Real Estate: http://www.dre.ca.gov/pdf_docs/FraudWarningsCaDRE03_2009.pdf