Here's another scam for troubled homeowners to avoid: forensic loan audits.
These are the loan-modification industry's latest "phony foreclosure-relief service," in which homeowners pay up-front fees for a forensic review of their lender's practices, but are provided no actual foreclosure relief.
"Forensic loan audits are yet another phony foreclosure-relief service hawked by loan-modification consultants trying to cash in on the desperation of homeowners facing foreclosure," said California Attorney General Edmund G. Brown Jr. "The foreclosure-relief industry continues to be long on promises, but short on results."
Those who offer forensic loan audits use inflated and misleading claims to persuade homeowners to pay up-front fees for services that produce no actual foreclosure relief.
Homeowners are encouraged to pay for an audit of their mortgage loan file to determine their lender's compliance with state and federal mortgage-lending laws. This audit is pitched to homeowners as a tool they can use to gain leverage and speed up the loan-modification process.
In truth, there is no evidence or statistical data to support claims that forensic loan audits -- even if performed by a licensed, legitimate and trained auditor, mortgage professional or lawyer -- will help homeowners get loan modifications or provide any other foreclosure relief.
Already bitten
Jack of San Jose, CA, is among those who claim to have been bitten. "The Mortgage Relief Law Center (MRLC) company cashed my check of $2,795.00 even thought they already know that our application is not qualified at the beginning," he wrote in a complaint to ConsumerAffairs.com. "They knew that we would not able to qualify, but never informed us and let us wait for six months without any status result from the mortgage company.
Finally, after almost seven months hoping, we received a letter from our mortgage company (CitiMortgage), which states that we are not qualified for a loan modification." MRLC, he says, refused his request for a refund.
"The State Bar is committed to dealing with all aspects of loan foreclosure fraud involving attorneys," said State Bar of California President Howard Miller. "We will continue to work with all the other government agencies to prevent fraud and to move for disciplinary sanctions against attorneys who violate their obligations to their clients."
By law, all individuals and businesses offering mortgage-foreclosure consulting, loan-modification and foreclosure-assistance services must register with Brown's office and post a $100,000 bond. It is also illegal for loan-modification consultants and businesses to charge up-front fees for their services.
Brown has sought court orders to shut down more than 30 fraudulent foreclosure-relief companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive loan-modification consultants.
In 2009, California investigated more than 2,000 complaints involving loan-modification scams. Nearly 350 individuals and companies received a Desist and Refrain Order to stop illegal activity.
"The DRE (California Department of Real Estate) has aggressively pursued loan-modification scammers who prey on vulnerable and financially stressed homeowners, and those peddling false hope by promising mortgage relief with a forensic audit will be scrutinized," noted DRE Commissioner Jeff Davi. "With consumer education efforts and warnings, we hope to keep consumers from falling victim in the first place."
Tips to homeowners
As part of the consumer alert, Brown offered the following tips to homeowners:
• Don't pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed.
• Don't ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house.
• Don't transfer title or sell your house to a "foreclosure rescuer." Beware! This is a scam to convince homeowners they can stay in the home as renters and buy their home back later. It could also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict you and take your home.
• Don't pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.
• Never sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off their delinquent mortgage. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.
California is not alone in its battle against these loan modification scams. Both the state of Florida and the Federal Trade Commission (FTC) have initiated crackdown on these so-called foreclosure rescue specialists.
