- Personal Finance
Prevent Foreclosure Advice: Was Your Home Loan Legal? Get a Forensic Home Loan Audit to Find Out
There are many ways to prevent foreclosure. Many of them most homeowners are familiar with, eg, loan modification, refinancing, short sale, etc. But most homeowners have never heard about another option that can help them stop foreclosure. What is it? A forensic loan audit.
Prevent Foreclosure Advice: What Is a Forensic Home Loan Audit
In layman’s terms, a forensic loan audit is simply an examination of all the documents you signed when you took out your home loan to see if they comply/complied with lending laws.
The legality surrounding forensic loan audits stem from the 1968 Truth in Lending Act (the TILA); also known as the Consumer Credit Protection Act. Its purpose is to:
. . . promote the informed use of consumer credit, by requiring disclosures about its terms, cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
As it relates to home loans, it protects the rights of homeowners when they take out a mortgage.
How a Forensic Loan Audit Can Help You Prevent Foreclosure
Following is an explanation of how having a forensic loan audit done can help you stop foreclosure.
Every detail of your home loan must be disclosed and explained to you, the consumer, as dictated by the TILA. In reality though, how many homeowners took the time to read all of the documents presented to them at the closing table.
I’d venture to say practically zero percent. This is why the mortgage consultant at your closing explains every piece of paper put in front of you to sign at your closing. They’ll give you a brief explain, then say something to the effect of, “Understand? Have any questions?”
And when you say, “Yes, I understand and no I don’t have any questions,” they say, “Sign here.”
During the last housing boom (the early part of this decade), many lenders took so many shortcuts that some lending laws might have been violated. Remember all the of the “exotic home loans,” going on at the time, eg, zero percent down with a credit score of only 580?
These days you can’t get a zero percent down home loan with perfect credit! These types of home loans have practically disappeared. But, they were all the rage back then. This just underscores how crazy some of the home loans were during the last housing boom. I know, I was a mortgage consultant for a time during this period.
It highlights how banks, lenders and mortgage brokers played a little fast and loose with federally mandated compliance guidelines (ie, the stipulations of the Truth in Lending Act) during this time. And this is what a forensic loan audit is designed to uncover.
During a forensic loan audit, if you that there were indeed violations, this can be used as a bargaining chip with your lender if you’re trying to prevent foreclosure.
What Happens During a Forensic Loan Audit?
When you undergo a forensic loan audit, all of the documents you were presented with and signed at your closing will be reviewed – in detail. Some of the elements that will be examined are:
Whether or not you signed the right documents;
The mathematical calculations of the interest on your home loan;
The actual loan terms; etc.
And a whole lot more.
If you hire an a professional to conduct your forensic loan audit, they will present you with a detailed report of the findings.
Who Does Forensic Loan Audits?
The professionals who do this type of work go by various titles, eg:
Forensic loan auditors
Certified fraud examiners
Certified forensic accountants
Mortgage forensic auditors
While some who perform forensic loan audits will tell you that mortgages have been completely wiped out because of violation of the TLA terms, don’t get your hopes up. This is a very rare occurrence.
How Much Do Forensic Loan Audits Cost?
Costs vary depending on jurisdiction, the type of professional you hire and a host of other factors. Some precursory research on the net shows firms charging anywhere a low of $500 on up to a few thousand dollars.
Beware of Home Foreclosure Scams
There are a lot of home foreclosure scams out there. Forensic loan audits are one of them. It doesn’t mean that it’s not a valid way to stop foreclosure, it just means that you have to do your research – like with anything else when it comes to your home (eg, hiring a contractor).
Don’t be pressured into having a forensic loan audit and whatever you do, don’t hand money over to someone unless and until you have thoroughly checked them out and you get something in writing. Make sure they’re a legitimate firm. Compare companies; don’t just go with the first one to contact you through the mail (a common way many homeowners first learn about forensic home loan audits).
Read more on how to avoid home foreclosure scams.
If you’re trying to prevent foreclosure, a forensic loan audit can be a great place to start because it can give you leverage when it comes time to negotiating with your lender.
Learn the #1 secret your lender won’t tell you that can prevent foreclosure.