Beware of Scam “Forensic” Loan Auditors/Companies
Ok, here we go go again… now the scams have hit the loan auditing industry. Most of these fakers are ex-mortgage brokers who didn’t make it in the mortgage industry and are now looking for a new way to make money. There are a few good auditors out there who have really put in the time, effort and research to actually know the laws and know how to properly state the elements of these violations in a manner that can actually help a homeowner in a foreclosure matter (and can help an attorney bring these violations as affirmative defenses or counterclaims in a foreclosure case).
TILA or supposed “Forensic” Audits that use standardized check-off lists without providing a mathematical determination of the TILA Disclosure Statement and amounts are NOT Forensic Audits. A check-off list or automated/software-driven TILA Audit describing potential violations as “Serious,” or “Moderate” is incompetent and useless. A Forensic TILA Audit must provide accurate TILA; Regulation Z citations, case law precendent, as well as actual computation of all settlement service fees properly allocated in the TILA Disclosure Statement or the Audit will NOT withstand scrutiny by legal authorities. Do not be fooled by imitations using standardized check-off lists.
There is absolutely nothing “forensic” about plugging loan data into some software and having it spit out a report. But that is exactly what most of these fakers are doing and they are charging anywhere from $395 to $995 based on what I have seen so far.
If the loan audit will NOT stand up to legal scrutiny then you have wasted your money and someone has scammed you into believing you were paying for something that would help you. Why would you pay for a loan audit that would not stand up to legal scrutiny?
The software driven report serves a limited purpose and I use a popular banking compliance software for my audits as well but this software-driven report is only a small piece of my actual audit and findings report. A true forensic auditor examines every document relevant to the loan and looks at signatures, dates, parties on the documents, who provided those disclosures or documents and also obtains the story from the client because every loan is a story. It involved people and usually quite a bit of communication between the borrower and the indispensable parties to the transaction.
I have myself setup for Google Alerts on a number of search terms so I go to these other websites pretty frequently. I also get clients who have dealt with some of these fraudsters and now want my help to clean up the mess and the wasted money. Hopefully this post will cause those who read it to really do some good checking before they part with hard-earned money.
Bottom line is to make sure you follow your gut. Do your homework, ask questions, ask for references. A good auditor will most likely have attorneys they work for and consult for.
Feel free to contact me if you have any other questions on this topic or would like a sample of my audit reports. You’ll be able to see the true forensic nature of a good audit vs. these computer-generated reports.
What is a “Forensic Loan Audit?”
Definition of the word ”Audit“
- A systematic, independent and documented process for obtaining evidence.
- formal examination of an organization’s or individual’s accounts or financial situation. An audit may also include examination of compliance with applicable terms, laws, and regulations.
- The physical review of practice records to determine if the practice has been (and is being) compliant with carrier requirements.
Definition of the word “Forensic”
- Relating to, used in, or appropriate for courts of law or for public discussion or argumentation.
- Of, relating to, or used in debate or argument; rhetorical.
- Relating to the use of science, specific methods or technology in the investigation and establishment of facts or evidence in a court of law:a forensic laboratory.
Loan servicing complaints
Section 6 provides borrowers with important consumer protections relating to the servicing of their loans. Under Section 6 of RESPA, borrowers who have a problem with the servicing of their loan (including escrow account questions), should contact their loan servicer in writing, outlining the nature of their complaint. The servicer must acknowledge the complaint in writing within 20 business days of receipt of the complaint. Within 60 business days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. Until the complaint is resolved, borrowers should continue to make the servicer’s required payment.
A borrower may bring a private law suit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6′s provisions. Borrowers may obtain actual damages, as well as additional damages if there is a pattern of non-compliance.
According to the Truth in Lending Act even a small mistake with calculating the borrower’s annual percentage rate could be an actionable violation, enabling the borrower to rescind the loan. Therefore, the threat of a lawsuit is often sufficient to persuade an otherwise uncooperative lender to negotiate an attractive work out with the borrower. Because the Truth-in-Lending Act (TILA) requires all attorney fees to be paid by the predatory lender (in which a new servicer is now the responsible party ), the vast majority of cases settle out of court quickly.
Even non-material disclosure violations or violations over a year old can still be used as claims and defenses in recoupment in a foreclosure defense. (See 15 U.S.C. § 1640(e)) – these claims and affirmative defenses raise genuine issues of material fact sufficient to survive any motion for summary judgment.
Until recently Forensic Loan Examinations were only made available to large banks and lending institutions wanting to determine their own exposure to risk and potential legal liabilities prior to purchasing large pools of mortgage loans.
Providing the loan audit gives homeowners more ammunition so they can stand a chance in negotiating a decent modification with lenders who have far more resources than the average borrower and often play hardball unless they are faced with the risk of a costly lawsuit.
A Forensic Mortgage Loan Audit using Lane Houk’s Proprietary Methods and Technology results in the most comprehensive and thorough audit reporting process of its kind that reveals ALL violations of Federal and State Codes including RESPA, TILA, HOEPA and ECOA along with detailing EVERY VIOLATION, its severity, and the specific law/regulation in violation in an easy to read format. ALL of the forensic loan audits reports can reveal these guiding queries:
Was fraud involved?
- Constructive Fraud
- Misrepresentation
- Victim of Bait and Switch
- Straw Buying Victim
- Steering
- Appraisal Fraud
Common Abuses:
Predatory mortgage lending involves a wide array of abusive practices. A brief description of some of the most common are:
- Excessive Fees
- Hidden Fees
- Abusive Prepayment Penalties
- Kickbacks to Brokers (Yield Spread Premiums)
- Loan Flipping
- Unnecessary Products
- Mandatory Arbitration
- Steering & Targeting
- Breach of Contract
We can help you find out…
- Did the loan officer accurately disclose the loan terms to you?
- Did you sign a separate broker fee agreement?
- Was your home’s value inflated by the lender’s appraiser?
- Did the lender fail to verify your ability to repay the loan?
- Were you given all federal and state disclosures?
- Were you properly notified of your right to cancel the loan?
- Do your closing documents contain any technical errors?
- Were you charged excessive or undisclosed fees?
- Has your loan been sold without your knowledge?
- Any and all applicable federal and state law violations
- The real terms of your loan
- Outline of hidden fees and/or commission earned by your broker or lender
- A complete assessment so you can pursue possible legal claims against your broker and/or lender
- Report of all factual findings of the forensic audit
In my experience, there are very few auditors out there who truly know the “forensic” aspects of the loan audit process. The real litmus test is to ask the auditor where most of their business comes from? If it’s not from consumer law attorneys walk away. Ask for attorney references at all times.
