Mortgage Skinny

Wow.   All of sudden this is a hot topic!  Last week I read some blog posts and some articles about how forensic loan audits are the new scam.   I can see how  cookie-cutter, computer-generated loan audits could possibly be a scam.   That type of  “loan audit” is set up so you just “plug in the numbers.”    This is not what I was talking about in my post about loan modifications.

Let’s start out with the definition of forensic.  Forensic means “something for court use.”   A forensic loan audit is a thorough investigation into the loan documentation of a mortgage to look for lending violations that can be used in a court of law.

A MANUAL forensic loan audit done by a Certified Forensic Loan Auditor is a different animal.  This is an in-depth investigation of the loan file in order to discover any fraud or predatory lending practices by the lender.   In California, a legitimate Certified Forensic Loan Auditor would look for violations of the following:

• Truth in Lending Act

• Real Estate Settlement Procedures Act

• Home Ownership and Equity Protection Act

• Predatory Lending Practices

• California Financial Code

• California Civil Code

There is a BIG difference here.   In the MANUAL forensic loan audit, you have someone reading through the loan documentation looking for violations of lending practices against the above list of rules and regulations.

If violations are discovered and documented through the above process, the borrower now has a negotiating tool to take to the lender.

These Forensic Loan Audits are used by borrowers, brokers, attorneys and Loan Modification Companies.   When you are doing your research for a Loan Modification, ask if the attorney or the loan mod company utilizes MANUAL Forensic Loan Audits as part of their negotiating process.  If they don’t, ask them to get one done on your file.  It can be a powerful and useful tool if there are lending violations in your loan.

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