Ok, it really bothers me… I’ve been wanting to write this post for a very long time. I’ve just been so stinkin’ busy it’s been put on the shelf several times. I’ve just tried to address this issue one by one as homeowners call me. But I cringe every time I hear the words “forensic audit” and I hate having to even say the words but sometimes I have to in order to help a homeowner or attorney understand what I (and a very select few others) do versus what the vast majority of these other individuals/companies out there are doing. That is why I have a category on this blog called “Forensic Loan Audits…” because the scammers that used to be in the “Loan Modification” business got put out of business by most Attorney Generals around the US after they saw millions scammed on that cottage industry. Nearly overnight, a new cottage industry of “retired” shall we say loan mod experts became “forensic auditors.”
Let me say this from the outset… there is a wide range of people and companies out there (including even some attorneys) who are selling “Forensic Audits.” They vary from outright scam artists to slick salespeople performing some [overly simplistic] level of some sort of a mortgage loan transaction audit but who charge exorbitant prices for the services and, ultimately, the work product they produce rises to the level of a scam as well because their fee and what they produce are universes apart – so I deem that a scam as well – that’s just my humble opinion of course.
There is one fairly high profile retired attorney out there operating a very popular blog selling extremely high-priced garbage [in my opinion]; unfortunately, many of his victims, I mean clients, have purchased this “audit” are left with many pages of virtual nothing-ness that they will never be able to use in a court of law. Quite ironic that it’s coming from an “attorney” or “counselor at law” – so to speak.
But, I don’t think any of you reading this right now are actually surprised of the story of another attorney or ex-banker taking advantage of people because they have a license, degree or bar number and using that “credential” to sell people on a scam. There are many prisons with such people calling those places home for these types of crimes.
So, now that I’ve spent a minute on the soap box, let me get to work to explain the difference between a “Forensic Audit” and a “Mortgage Loan Compliance Analysis” because there is a difference – like night and day. I think it’s a good place to start to say that I come from the mortgage banking industry and I have over a decade in actual experience in the inner workings of this industry and I have had to demonstrate continued competence in the actual compliance with the very laws we are looking into to see if these loans complied with these laws. I challenge you to find a “forensic mortgage loan auditor” out there in or even around the mortgage banking or finance industry. You won’t. You will find compliance officers. You will find fraud investigators. You will find compliance analysts and underwriters and risk managers. The closest thing might be the field of Forensic Accounting. But you will never find a legitimate forensic mortgage loan compliance officer using the term “forensic audit” or “forensic auditor” or even “forensic loan audit.” This is simply some deceptive marketing term invented by slick scammers who could probably sell a lot of people a box of coal and pass it off as a box of diamonds.
“Forensic” literally means “suitable for use in a court of law.” So the layman’s translation means that whatever report or whatever you might get from a “forensic auditor” must, and I mean MUST, withstand the legal scrutiny of a judge, jury and opposing counsel.
So, I’ll just dive right in here and make a point: you can use the word “forensic” if – and only if – your work product is deemed suitable for use in a court of law. So that’s the lens that any and all investigation by YOU as a homeowner MUST use in conducting your due diligence if you’re in the position of needing help to defend yourself from foreclosure or the potential illicit collection of mortgage loan debt.
I will say this… if you see ANYONE pitching a “Forensic Audit,” I would just turn and run. Even the simple use of that title – forensic audit – should set of alarm bells. What is it a forensic audit of? What does that even mean? Really, it doesn’t even tell you anything – other than it’s a slick marketer using a buzz term to sell you something. The question really is or should be – “will it be suitable in a cour of law?”
Conversely, a Mortgage Loan Compliance Analysis is EXACTLY what it’s name implies plus a bit more. What do we do? We analyze the mortgage loan documents for actual compliance with Federal Lending Laws. Did the original lender provide the borrower with the mandated loan disclosures from the date the borrower applied for the loan through to the closing or ratification of the mortgage loan transaction and were the material Truth in Lending Disclosures such as the APR, Amount Financed, Finance Charge, Amount of Payments and Payment Schedule were properly and accurately computed – this is a mathematical process that requires a very comprehensive understanding of Regulation Z, Section 226.4 along with the Official Staff Commentary for that section. It’s also an investigation and analysis of the transaction to see if the original lender [and any mortgage broker involved] that may have been involved complied properly with underwriting guidelines and a look into any possible mortgage fraud or predatory lending violations such as bait and switch tactics or even forgery of the borrower’s initials or signature on loan disclosures or loan closing documents. Finally, it’s also an investigation into whether the lender and/or broker was properly licensed. All of these issues are examined, documents analyzed, TILA disclosures re-computed for accuracy and comparison and then all of this is [or should be] rendered in a report or affidavit format along with any and all supporting exhibits such as the loan documents and other components of the investigation.
Now, here’s the clincher… a “Forensic Audit” is almost always going to be a collection of boiler plate fluff with a few specifics strewn throughout the template to pass this garbage off as legitimate. However, any real scrutiny of these documents by someone who knows what to look for – or worse, a judge or creditors rights attorney – will easily reveal the fact that 99% of these “forensic audits” aren’t worth the paper they’re printed on [ie. utter worthlessness]; which is real shame seeing that the homeowners who get suckered into these scams have precious few economic resources. They deserve a real service and a real work product that will actually stand up in a court of law.
A real mortgage loan compliance analysis and investigation will be highly CASE SPECIFIC. For it to be considered “forensic” in any sense of the word, it MUST be specific to YOUR CASE, not boiler plate. And judges HATE boiler plate, non-specific pleadings and if you try to throw a boiler-plate, template of a “forensic audit” at a judge in your case, you are asking for his/her wrath not to mention being completely discredited which never has a happy ending. I always tell people who are inquiring to hire me that there is no shortcut to these analyses and investigations. A mortgage loan transaction and any corresponding foreclosure case is like a fingerprint… no two of them are the same. Yes, you have a set of laws and guidelines that apply to all transactions but no two transactions are the same, period. Any and all work product must reflect that level of specificity if it is to be considered “forensic” in any way and has any chance of actually helping you make valid claims in a court of law.
So here’s my tip to help any homeowners facing foreclosure reading this: ASK for attorney references even IF they are an attorney. Ask to see their credentials. Ask for actual samples. Ask to see actual court cases their work product has been filed in and/or used in. Ask for customer references. Two words: DUE DILIGENCE… plus four words: DON”T BELIEVE THEY HYPE. Because your money can either be completely wasted or put to very good use depending on WHO you hire and what they produce. Finally, call or email me… I’ll send you a couple samples with borrower info redacted so you have something to compare the garbage to. Hopefully this helps a bit… Good luck and happy hunting.