July 22, 2024

Warning To FHA Borrowers – Avoid Fraudulent Forensic Loan Audits, Loan Mods And Foreclosure Scams

Falling behind on FHA mortgage payments has resulted in a nightmare scenario for many homeowners.  The economic mess that our country has fallen into since the housing bubble burst in 2006 has produced the double disaster of unprecedented unemployment along with collapsing home values.

Unfortunately, many delinquent FHA borrowers have had their financial misery compounded by unscrupulous and fraudulent businesses that offer loan modification and foreclosure rescue services.  Desperate and vulnerable homeowners who run into financial difficulties and do not want to lose their homes are often seduced into paying large upfront fees to fraudulent “foreclosure assistance” companies.  Later on, the homeowners discover that they were deceived and not helped.  In the most egregious cases, the loan mod companies were outright frauds who simply took money from desperate homeowners and then closed up, fleeing with the customer’s money.

courtesy patsabin.com

The fraud and abuse of loan modification and foreclosure assistance companies preying on homeowners became so widespread that numerous regulatory agencies took major action to put them out of business.  The State of Connecticut, for example, effectively shut down loan mod companies by instituting licensing requirements, background checks and mandatory professional bonding insurance.  In addition, the State of Connecticut prohibited upfront fees for loan modifications or foreclosure assistance.

The State of California passed a law in 2009 which prohibited any person, including attorneys or real estate licensees, from collecting upfront fees for promises to modify loans or deliver mortgage loan forbearance.  Although the new law dramatically reduced the widespread fraud involving loan mod and foreclosure prevention firms, criminals soon found a new way to circumvent the law and prey on financially stressed, vulnerable homeowners.

The California Department of Real Estate recently published a warning that scams from “home rescue” companies are now centering around a promise to provide consumers with a “forensic loan audit” which they describe as an “overblown and exaggerated sales pitch” from unlicensed firms previously engaged in illegal loan mod and foreclosure rescue scams.

The forensic loan audit scam is marketed to consumers as a “mortgage analysis” to determine if the lender complied with state and federal lending laws related to interest rates, fees and truth in lending requirements.

According to the California Department of Real Estate the claims and sales pitches for fraudulent forensic loan audits include the following:

B. What are the Claims/Sales Pitches?
They are many and varied, and include:
1. The audit will identify all potential fraud committed by your lender.
2. The audit is guaranteed.
3. The audit is 100 percent free.
4. The audit will show your lender that you are “pro-active”.
5. The audit will identify problems with your home loan that support a lawsuit against your lender.
6. The audit will give you the leverage you need to stay in your home.
7. The audit may give you the right to rescind your home loan, or to reduce your principal.
8. The audit will help you modify your home loan. It will give you a step up in the loan modification process.
9. The audit may allow you to stop foreclosure in its tracks.
10. The audit is the key for gaining leverage in lender or investor negotiations.
11. The audit will be performed by “expert” forensic auditors.

The warning letter from the California Department of Real Estate states that there is no statistical evidence to support the claims that a forensic loan audit will result in a successful loan modification or stop a foreclosure.  Furthermore, many of the “audits” are done by minimum wage type workers who possess no specialized knowledge and simply run your information through a software program.

In addition, even if the forensic audit uncovered some potential lending violations, they may be inconsequential and would not apply if your loan was sold to an investor.  A lawsuit against a lender could take years and involve huge legal fees with no guarantee of success.  The company offering a “forensic audit” will try and convince a homeowner with exaggerated claims or false guarantees of success.  Homeowners who have been victimized by “loan mod/foreclosure rescue” scams should contact the state banking department and consumer affairs division.

Free Government Approved Housing Counselors For FHA Borrowers

Avoid getting ripped off!  The first step for any homeowner in financial distress should be to contact appropriate federal government agencies that can provide assistance and advice on avoiding foreclosure.

FHA borrowers are offered free foreclosure help directly from the U.S. Department of Housing and Urban Development (HUD) and the FHA.  Any homeowner having difficulty paying the mortgage should immediately contact a  Qualified HUD-approved housing counselor for help.