Forensic loan audits have quickly taking center stage as a key component in uncovering and resolving the predatory lending abuses of the past several years. Unfortunately, just as with loan modification companies, this has created an opportunity for abuse by a few “bad apples” who peddle superficial audits on unaware homeowners desperate for a solution to their mortgage nightmare.
To help in setting minimum standards for the industry, De Novo Financial Solutions, LLC, a provider of premier loan audits, has begun contacting other forensic loan audit providers to form a trade association for the forensic loan audit industry.
“Forensic loan audit companies are springing up like mushrooms”, Says Emilio Francisco, a Lawyer from E Francisco & Associates, LLP. “Unfortunately, there are no standards or ways for a homeowner to really evaluate their product. That is very important, a loan audit is a legal document that a homeowner is depending on to help them save their home.”
The purpose of a forensic loan audit is to find substantial violations of consumer or contract law in the loan documents of a homeowner. Once the audit is complete, the homeowner can then take the audit to an attorney and challenge their mortgage in court. Many audit companies are currently charging hundreds of dollars to perform a basic software or technical audit, although an important part of the audit process, this type of audit does not give the homeowner all the forensic analysis they need to mount a credible challenge against their lender.
“You can cry, “predatory lending” all day long, but if you don’t have detailed proof about what happened to an individual homeowner, a judge will throw the case out of court”, says Steve Chandler, one of the founders of De Novo. “So many of the audits from other companies we review are filled with filler or fluff to impress the homeowner. The audit is really performed for the attorney. It is the basis for their case. It has to be filled with credible violations of law or you have wasted your money and potentially lost your home”.
Many times the intent of retaining an attorney and conducting an audit is not to force the parties in to a lengthy and costly lawsuit but rather to encourage the lender to sit down with the borrower and to negotiate an affordable work out so the borrower can keep the home and the lender can mitigated its loses.
Maurice Walker from the Debt Reduction Law Center describes having a quality audit as, “loan modification with a gun to the lenders head. With all their resources, going up against a big bank is like David versus Goliath. The audit gives the homeowner and the attorney the ammunition so they can stand a chance in negotiating a decent modification with lenders who have far more resources”.
De Novo plans to invite other loan audit companies to join in a preliminary forum of discussion of what performance standards and ethical practices should be established to protect the homeowner and to foster a more stable industry.
