A forensic loan audit can be a useful tool in formulating a defense to a foreclosure action. A forensic loan audit entails a review of a borrower’s loan documents to discover violations of federal and/or state lending laws. Forensic loan audits are usually conducted by an attorney, loan officer, or other trained professional.
Why Should You Consider Having a Forensic Loan Audit?
A forensic loan audit may reveal violations of various laws by the lender. A homeowner can use these violations as a defense to a foreclosure action or as leverage to force a lender to cancel the foreclosure sale and approve a loan modification, short sale, or other workout plan.
What Violations Might Be Revealed by a Forensic Loan Audit?
Some experts believe that as many as 95% of all mortgage loans may be unenforceable due to violations of federal and state law. The most common violations identified by a forensic loan audits include:
- General errors in the loan documents, such as incorrect names, addresses, and legal descriptions;
- Real Estate Settlement Procedures Act (RESPA) violations;
- Truth-in-Lending Act (TILA) violations;
- Homeowner Equity Protection Act (HOEPA) violations;
- State Lending Law violations;
- State Predatory Lending Law violations;
- Issues with the Good Faith Estimate;
- Misleading or omitted disclosures;
- Fraudulent appraisals;
- Falsified loan application and supporting documentation;
- Forgery;
- Lender/Broker Misrepresentations
- Excessive interest rate adjustments; and
- Excessive points and other loan fees.
A forensic loan audit should be conducted by a human, rather than a computer. As a part of the forensic loan audit, the auditor will review every loan document signed by the borrower and compare those documents to all applicable federal and state statutes and case law. The auditor will interview the borrower to get a full understanding of the circumstances surrounding the loan, including what the loan officer, loan processor, mortgage broker, and real estate agent told the borrower about the loan and to determine whether the borrower actually got the loan he was told he was going to get.
Forensic Loan Audit Results
At the conclusion of the forensic loan audit, the auditor will write a report which sets forth all the errors and violations of the law which were discovered. If the forensic loan audit is conducted by an attorney, it will also include a list of legal options available to the borrower.
Getting Legal Help
It’s best to have an attorney conduct a forensic loan audit because an attorney can provide you with legal advice for using the results of the audit to stop the foreclosure. Many attorneys who perform forensic loan audits also represent clients in defending foreclosure actions.
