A few years ago a forensic loan audit was a common tool for "mortgage rescue" companies if you suspected your bank of unfair practices and wished to pursue a lawsuit against your lender. However forensic loan audits are unnecessary in relation to the numerous other ways a foreclosure attorney can fight for your home.
The FTC warns consumers against companies using Forensic Loan Audits to lure in clients as a mortgage loan audit is expensive and offers no significant benefit to the homeowner.
A good foreclosure lawyer will make sure all of your loan paperwork is compliant, if necessary, as a tactic in your foreclosure defense case.
According to the FTC, and its law enforcement partners:
- there is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.
- some federal laws allow you to sue your lender based on errors in your loan documents. But even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable.
- if you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.
Source http://www.consumer.ftc.gov/articles/0130-forensic-loan-audits
When applying for a mortgage loan, there are certain procedures the bank must follow. An audit of the loan documents is purportedly used to determine if the bank made any legal mistakes when you signed your initial loan documents.
Here are a few things that your lawyer may review in your original loan paperwork to determine if the bank has followed the proper procedure:
Good Faith Estimate and Truth-In Lending Disclosure
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When you apply for a loan, there are certain disclosures required to be provided to you. These disclosures include a Good Faith Estimate, Truth-In-Lending Disclosure, Annual Percentage Rate Disclosure (APR), a Mortgage Servicing Disclosure Statement, and a special information booklet. Note that the Good Faith Estimate is required to be provided to a borrower within three days of the loan application (unless the application is denied by the lender). This is required under the federal Real Estate Settlement Procedures Act ("RESPA").
HUD-1 Settlement Statement
Also, a Form HUD-1 Settlement Statement (also known as a "closing statement") should be prepared by the closing agent (sometimes referred to as a "title company" or "attorney") that summarizes all of the sources and uses of money relating to the loan transaction. This is true for both the purchase of a house or refinance. RESPA laws entitle the borrower to review the closing statement at least one day prior to the closing date. The purpose of this advance review by the borrower is to prevent "surprises at closing" (e.g. higher fess than the borrower had agreed to pay).
Initial Escrow Statement
If your lender is collecting monthly escrow payments for real estate taxes and/or homeowner's insurance, the lender is required to provide the borrower with an Initial Escrow Statement Disclosure showing the borrower and itemized estimate of the expected real estate taxes and property insurance premiums and/or any other payments that may be included in the monthly escrow payment amount. Again, the purpose of this disclosure is to avoid presenting the borrower with any "surprises" regarding their monthly escrow payments.
Lending Law Violations
There are a variety of lending law violations that can occur during a mortgage loan origination and closing process. Only a lawyer can decide if you need a forensic loan audit, a good foreclosure defense attorney will look at several other options before asking for a forensic loan audit as this can be expensive and time consuming for both the lawyer and the homeowner.
A good foreclosure defense attorney usually will not advertise a forensic loan audit as part of their services and instead make sure that the bank has provided all of the necessary paperwork when going over the loan documents received from the lender. In many cases, an FLA will not provide the leverage that many homeowners are looking for and can prove a waste of time in many foreclosure cases.
Do I need a forensic loan audit?
No, you do not. The forensic loan audit was fabricated by "mortgage rescue" companies as a means to lure in homeowners and charge fees that they wouldn't have been able to collect otherwise.
A forensic loan audit will not help you avoid foreclosure. Even if you sue your lender and win, the bank is not required to give you a loan modification or stop foreclosure. The best way to avoid foreclosure is to hire a foreclosure defense attorney that will examine every route possible for your individual situation. Speak to a foreclosure defense attorney before pursuing any specific legal routes.
