A loan audit, also referred to as a forensic audit, is an inspection that may take place before or after a mortgage or loan modification agreement is enacted. During a loan audit, all mortgage documents, including contracts and other paperwork, will be reviewed regarding their legality. By federal law, according to the1968 Truth and Lending Act, it is required that loans include correct ARM rate calculations, correct ARM Adjustment terms, and appropriate terms regarding APR(Annual Percentage Rate). Primarily, the loan audit will check the documents with these federal laws and other local laws, as well as conduct any revisions needed for them to comply. More specifically, the audit will make sure that appropriate notices are provided, the terms are sensible, and that all legalities are properly considered. Reviewing a loan's legality is often considered the responsibility of the mortgage or loan modification company, but it is not a wise precaution for homeowners to consult with an auditor themselves. If you are not provided with an loan audit, it may be wise to speak with a loan specialist before advancing with the mortgage or modification. When facing foreclosure, a loan audit that finds against the lender may also be used as grounds for a wrongful foreclosure.