Friday, October 10, 2008

Forensic Loan Reviews

The Chicago Tribune reports that certain companies are now offering forensic loan reviews to homeowners facing foreclosure to determine if their lenders made any mistakes during the loan process that the homeowners could now use to get out of their loans.

These companies will scour loan documents looking for errors in, among other things, the truth in-lending (TIL) statement the lender or the lender's annual-percentage-rate (APR) calculations. If the TIL statement doesn't match up with the HUD-1 closing-cost sheet, a borrower might have cause for legal action against the lender.

Typically, forensic loan audits are ordered by mortgage investors to determine what kind of legal liability confronts them in the pools of loans they already own or are considering buying. As a so-called "business-to-business service," they are not generally available to individual borrowers.

Fees for this service could be as high as $3,000, depending on how much is owed on the mortgage. But if an error is found, it could provide great leverage when trying to negotiate with the banks.

One particular company says that well over 80 percent of the recent audits performed by their company have revealed major truth-in-lending violations, errors in the good-faith estimates required under the Real Estate Settlement and Procedures Act, illegal predatory lending practices or even fraud.

My question: Do these companies employ lawyers? If not, is this the unauthorized practice of law?


Unknown said...

I do this everyday and I am not an attorney. However I was formally trained (back when credit was more stringently reviewed for risk before being granted and monitored)in commercial and corporate and credit analysis . I have worked within state and federal lending laws and regulations in concert with the institution's credit policy as a commercial lender. Consumer disclosure dictated by credit policy - or lack of - and federal and state law, statutory and case, are always a part of that. I would love to get a job in a law firm performing this and para-legal duties, as I also worked in corporate and federal and state banking law. I have done commercial loan workout and now do mortgage workouts. I have all the contacts for servicing agents that route directly to the legal department where loss mitigation is rather than through the consumer toll free void. I have these conntacts because I work for the state banking department as a regulator, not always directly, but regarding lenders and servicers still subject to examination because these entities are licensed in VT. There is an ever growing number of loan modification scam artists using advance pay schemes as well as plenty doing the minimum and taking a much longer period of time while approval is awaited for ridiculous amounts of money. Most of these mods are also unsustainable and are merely temporary stop gaps pre-foreclosure. They do not include forensic analysis either. If you know of any law firm (not a loan modification company )in the business of either forensic loan review or modifications (actually they are intertwined)in New England please let me know. Thank you.

Yotraj said...

Marianne, would you care to do one in Ohio? Discovery is done, everything's digitized and easily sent. Payment would be commensurate of successful Legal outcome. That's enough for here. Email me at

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