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The Latest ‘Foreclosure Rescue’ Scam–Loan Audits

The Latest ‘Foreclosure Rescue’ Scam–Loan Audits

Mortgage Fraud Examiners, the investigative firm who warned the public about loan modification scams and the “criminal loan modification trap” months before the Obama Administration, is now warning the public of this latest scam.

Ashburn, Virginia – June 9 2009 — When the mortgage crisis hit American homeowners full-force, companies offering “foreclosure rescue” and “loan modification” companies sprouted like weeds. While a few of these companies were legitimate, most promised troubled homeowners quick-fixes for high fees, and failed to deliver after collecting their money, leaving families poorer and closer to homelessness.

Now that federal and state law enforcement agencies have begun to crack down on “foreclosure rescue” and “loan modification” scams, the hucksters have found a new snake-oil to peddle: “loan audits,” warns a consulting group Mortgage Fraud Examiners. The new flood of loan audit companies is fueled by the spread of loan modification companies in an attempt to side step the upfront fees that the states have prohibited these companies from charging. They’re the proverbial “wolf in sheep’s clothing.”

Mortgage Fraud Examiners is a project of Lex Consulting For over 30 years, Lex Consulting has provided litigation support to attorneys, helping them break into new areas of practice, or providing specialized advice for complex cases requiring novel approaches to the law. Due to the recent housing crisis, Mortgage Fraud Examiners, a team of specially trained attorneys, was created to provide lawyers with comprehensive assistance to help them keep their clients in their homes.

Mortgage Fraud Examiners CEO Storm Bradford explains: “Although ‘loan audits’ can be of substantial value to a homeowner, regrettably, most companies providing ‘audits’ are not qualified to do so. Most of these so-called ‘loan audits’ are performed and sold by persons with no legal training, who input some data into the same software program that lenders were using as a compliance checklist against federal regulations. The “audit” is a useless checklist of the documents provided to the “auditor,” with no information about the legal implications of the documents. It’s that old adage on computer software: ‘Garbage-in, garbage-out.’ Think about it: If the software didn’t find the mortgage errors when the lender used it, how is it going to find the errors when Joe the Auditor uses it? We do our forensic appraisals and audits mostly for attorneys. They are going to spot a garbage report a lot quicker than a layperson. We have to provide services that withstand the scrutiny and demands of a trained legal eye. You need a specific and unique legal knowledge to do a loan audit; a ten-minute software audit is no substitute for three years of law school. We’re legal professionals looking for things that software can’t find, besides, we know what to look for!”

Daryl L. Jones, Esquire of EquiVest Law, P.A., a law firm in Miami, Florida specializing in foreclosures, employs the services of Mortgage Fraud Examiners explains, “I’ve reviewed mortgage audits from several different companies that conduct loan audits using auditors with no legal backgrounds, and found them to be less than useful. Mortgages are contracts. And the law changes regularly. These changes may occur at the legislative or agency levels or in the courts. They affect state and federal statutes, regulations, torts and all types of legal anomalies. If I had a choice between a mortgage audit prepared by a lawyer versus one prepared by a non-lawyer, I would choose the lawyer’s audit every time.”

Attorney Jones adds: “The threat of foreclosure is a legal problem, and you start by treating it like any other legal problem. The first basic step it to determine whether the mortgage is legally valid. In addition, there may have been tortious conduct before or after the mortgage was executed, so knowledge of basic tort law is essential.”

A true “loan audit” examines homeowners’ appraisal, mortgage and supporting documents, in the context of the dealings surrounding the creation of those documents; so legal experts can discover legal defenses a homeowner can use to avoid foreclosure. Or to use the law offensively to obtain favorable refinancing on the borrower’s terms, rescind the mortgage and get all of their money back, possible punitive damages, or even in some cases get their house free and clear.

How does a consumer spot a legitimate loan auditor from an untrained one? “Ask the right questions,” Bradford advises. “Ask how they do they conduct the audit- is it software, or are there specifically trained attorneys spending real time doing the work? Be wary if they tell you something vague like, ‘Attorney backed.’ What you want to know is the role that those alleged attorneys actually play in doing the work. Homeowners need to be careful. You even have attorneys using software instead of doing what they are paid to do—that’s looking for contract defenses.”

Bradford adds, “Above all else, though, I think I would advise the layperson to avoid dealing with loan audit firms altogether. When you have a legal problem, see an attorney. Let your attorney do the work of the audit herself, or employ a loan audit company that she has evaluated and trusts based upon their legal expertise. Finally, when you deal with an attorney directly, you are protected by attorney-client privilege. You have no such protection when you deal with the loan audit company directly.”

“There really are many legal options available to homeowners facing foreclosure,” Bradford concludes. “But there are no shortcuts to finding them. Every claim has unique facts, every claim has different applicable law, and only a legal specialist using the brain God gave him is going to find the answers to help each individual household.”

For more information contact: Storm Bradford, Mortgage Fraud Examiners, by phone:800.540.EXAM (3926), by email: [email protected] and visit their website:

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