Real Estate Scam of the Day: The Forensic Loan Audit

When a homeowner undergoes a forensic loan audit, it is not as harrowing for the homeowner as you might think. During this type of audit, an investigator sifts through all mortgage documents related to the debt on the home, looking for instances in which a lender may have made a mistake or broken the law. Such mistakes can include inaccurately stating finance charges or violating predatory lending laws. If mistakes were made on your loan, you can use those errors to combat everything from foreclosure to adjustable rate mortgages to being upside down in your home and renegotiating the principle on your mortgage.

However, while forensic home loan audits can be a good thing for homeowners, they are also an extremely fertile breeding ground for scam artists. As more and more homeowners try to make their mortgages work, an increasing number are looking for grounds to renegotiate the terms of their loans or even escape their debt all together. Sound too good to be true? Often it is, and homeowners may pay thousands of dollars for this type of service only to be told that their loan is airtight (whether it is or not) or to simply never hear from the company that took their money again.

Last week, the Better Business Bureau (BBB) started tracking forensic loan inquiries and complaints as a separate category of fraud, reported Jody Thomas, vice president of communications for the BBB of Greater Maryland. While the vast majority of issues are really just inquiries at this time (21,000 inquiries in the past 12 months at the Greater Maryland BBB alone), there have been 160 complaints lodged in the area thus far.

The U.S. Federal Trade Commission has gone farther, saying simply that forensic mortgage audits are a scam. According to the FTC, “there is no evidence that forensic audits help to get a loan modification or other foreclosure help.” Furthermore, sales tactics are often misleading, since a lawsuit against a legitimately guilty lender does not necessarily mean that the lender will modify the loan, and if the loan is cancelled then the borrower still has to return the money.

If you do opt to work with a company that conducts forensic loan audits, beware of up-front payments and high-pressure sales tactics. You should also carefully consider before following any advice that includes not speaking to or paying your lender, and consult a real estate attorney to determine if you likely have a case before forking over your money.