Warn Your Customers about False Loan Audits

September 29, 2011

Hundreds of organizations have cropped up over the last two years offering forensic loan audits, a scam targeting struggling home owners looking for a loan modification to save their home from foreclosure.

Often linked to professional attorneys and auditors, the organizations claim to review a home owner’s mortgage documents to determine whether their lender had complied with state and federal lending laws. They then promise to get the home owner a quick loan modification and possibly a principal reduction on their mortgage too. Home owners pay an upfront fee — usually about $3,000. While the audit may indeed reveal errors in loan documents, the process very rarely results in a loan modification or rescind.

The Federal Trade Commission issued its first alert about the bogus auditing practice in 2010. The Better Business Bureau reported no complaints about forensic loan audits that year, but said 50 complaints have been filed through the first eight months of 2011. Since 2008, the FTC reported a jump of more than 300 percent in mortgage foreclosure relief and debt management complaints, and last year received more than 28,580 for the category that includes all mortgage-related issues.

"They lure consumers to believe that by hiring them for a review of a loan modification package, they can expedite the process and get better results, or they make false promises that they can get a loan mod or principal reduction," said Josh Fuhrman, the FTC’s senior vice president of community affairs, told AOL Real Estate News. "Home owners are not typically getting any results. (Scammers) are just stringing (homeowners) along, or they disappear."

Contact ALTA at 202-296-3671 or [email protected].