A mortgage loan audit, sometimes called a forensic audit, reviews the terms of your mortgage to assess the validity of the loan. If there is something amiss in the mortgage, forensic auditors say you can force a loan modification in your favor or rescind the loan altogether. The quickness of this process depends on several factors, such as the ability to secure an auditor and how busy she is. The average time for an audit is up to two weeks.
If you’re seeking a mortgage loan audit to negotiate better payment terms with your lender, a federal Housing and Urban Development-approved counselor can provide you with information to help you avoid foreclosure. The HUD representative can determine whether you qualify for reduced monthly payments under the Homeowner Affordability and Stability Plan. Foreclosure prevention counseling is free and provides the same information that a for-profit agency or auditor does.
Taking It to Court
Supporters of mortgage loan audits say most mortgages contain some legal flaw that gives the homeowner leverage in getting a better lending rate. However, in 2012, Illinois Attorney General Lisa Madigan said “An audit can almost never be used to negotiate a lower rate with your lender.” Although many errors have been found in mortgages, the only resolution open to a homeowner that wants to take the lender to task through a formal, binding legal process is through the court system, which can be expensive.
The Federal Trade Commission strongly warns about using private forensic mortgage loan auditors to obtain a forensic audit. The fee for a mortgage loan audit will cost you around $200 to $300. Your mortgage is reviewed in about one to two weeks. If the auditors find the lender has not complied with mortgage lending laws, you’ll be informed that the report will assist you in lowering your mortgage payment, avoiding foreclosure, modifying your mortgage or canceling your loan, the FTC says.
According to the FTC, “fraudulent foreclosure 'rescue' professionals use half-truths and outright lies to sell services that promise relief to homeowners in distress.” Madigan calls mortgage loan audits a new kind of “mortgage rescue fraud.” If you are looking for someone to review your mortgage for errors in hopes that you may be able to get lower payments or even rescind your loan, beware of scams. Madigan advises using a HUD representative. A reputable lawyer, preferably one who is experienced in real estate sales and mortgages, may also be able to help. Even though you may find mistakes in your mortgage documents, you still need to file a lawsuit against the lender to guarantee any remedy.
- LoanSafe.org: What Is a Mortgage Loan Audit?
- Nolo: Foreclosure Scams -- Forensic Loan Audits
- Housing and Urban Development: Foreclosure Avoidance Counseling
- Illinois Attorney General Lisa Madigan: Madigan Sues “Forensic Loan Audit” Schemes for Ripping Off Homeowners Seeking Loan Savings, Help Fighting Foreclosure
- Federal Trade Commission: Forensic Loan Audits
- David Sacks/Photodisc/Getty Images