A "forensic audit" is an evaluation of an individual’s financial information. The purpose of the audit is to to investigate the potential for any of the following:
- White collar crime
- Insider trading
Forensic audits have also been used in preparing loans and in preparation for foreclosure defense.
A forensic audit used in a foreclosure may help evaluate all the documentation used in preparing a home loan to ensure all information was done properly. The idea with these audits was to catch mistakes made by mortgage underwriters during the height of the housing boom. Because the lending market was incredibly competitive, forensic audits are pitches as a way to catch predatory lenders or unscrupulous practices that may be violating Truth in Lending Act or other state and federal laws.
It depends. It is worth noting that many of the practices used in forensic audits for foreclosure sparked the interest of consumer protection agencies. The idea behind these audits was to help evaluate all the documentation used in preparing for a foreclosure. Many of these "audits" claimed to be a way to save borrowers who were over their head and facing foreclosure, but may have just been a scam. Here are several factors that may make these "audits" illegal:
- Making large payments in lieu of making mortgage payments – Many of these companies suggest remitting a large payment several hundreds of dollars to them in order to conduct an investigation with the hopes it could uncover lending violations, therefore voiding the mortgage. These claims are almost entirely without any ground to stand on, and in fact are only harmful to the borrower, who will ultimately wind up further behind in their mortgage payment.
- Avoid foreclosure – Likewise, the crux of forensic audit scams is the promise that foreclosure may be avoided. However, only the borrower would have standing to sue a lender to stop foreclosure, and an attorney could just as likely uncover any fraud in the loan, making these "auditors" an unnecessary and expensive third party.
- Guarantees of loan modification – Even if a forensic audit uncovers errors, the lender is under no obligation to modify or cancel a loan.
- Guarantees of lower payments – Likewise, even in the event errors are found, lender is under no obligation to offer lower payments.
If you used a forensic audit that promised any of the following, consulting with an real estate attorney may be a wise decision. An experienced attorney in your area can identify and help you handle potentially fraudulent behavior, and may even be able to assist in any ongoing foreclosure issues you are facing.