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.

Bookmark It

A loan modification is a lender-approved change in the rate and/or terms of your mortgage.  Getting a loan modification was widely promoted a few years ago when the real estate market bubble burst.  Many home owners saw their mortgage interest rates adjust upward.  Many others lost their jobs.  The net result of this was struggling home owners who ended up defaulting on their mortgages and were facing foreclosure.

Loan modifications were promoted as the  “fix” for keeping your home and in truth, this can be the “fix” for many home owners if they can get their lenders to cooperate.  And that is the key.

Lenders do not have to approve anyone’s loan modification.   The government can’t force lenders to loan modify their borrowers.  There are no laws enacted for this, so it is really up to the lender.    The lenders have no incentive to loan modify anyone because they lose money if they lower your interest rate.    If you have been trying to get this done, you know how frustrating and irritating this can be.  The people who answer the phone at the bank have no authority to approve anything, you get a different person each time you call in, and then after months and months you get denied because _____________(insert reason here.)

Okay, you need leverage.  You need something that you can take to the lender as a tool to negotiate, something that gives the lender a reason to approve your loan modification request.   Something that would behoove them to approve you.

There is such a tool.  That tool is called a Forensic Loan Audit.  “Forensic” in this case refers to the investigation and establishment of facts or evidence for a court of law. A forensic loan audit, when done by a Certified Forensic Loan Auditor, is a thorough review of the borrower’s loan documentation in order to find potential violations of the laws and regulations that govern mortgages.  There are two types of these loan audits;  automated and manual.  The manual loan audit by far is the best one to use because it isn’t done as a rote review.    And you want a NAMU Certified Loan Auditor to do your manual loan audit for you.  NAMU is the National Association of Mortgage Underwriters and they put their trainees through a lengthy training and certification process.  I can’t stress enough how important it is to get a manual loan audit.   Now, how do you use this?

A manual forensic loan audit is documentation that will reveal every violation of lending rules and regulations that your Loan Modification Company (or your Real Estate Attorney) can take to the lender to get them to approve your loan modification.  Some of these violations can result in huge fines on these lenders. These fines would be in addition to the high costs of defending themselves in court.  Most lenders will gladly approve your loan modification in order to stay out of  court where they would be up against violations that are obvious and documented.

This is a great tool!  I can’t guarantee that every loan audit will show up violations.  I can’t guarantee that lenders will ALWAYS modify your loan when threatened with documented lending violations.  But finally, here is leverage for the homeowner who just needs a little help to be able to make his monthly mortgage payments.

Email me via my contact page if you have any questions about forensic loan audits.

Bookmark It