Buyer beware: Mortgage modification 'audits' can be huge ripoff

mortgage modificationsSo-called "forensic audits" are often nothing more than con games bilking distressed homeowners out of money they certainly can't afford to just toss away. One high-ranking California law enforcement official is trying to steer people away from them.

Former California governor, turned current California attorney general, and soon expected to announce he wants again to be California governor, Jerry Brown, is pointing out to all who will listen that some of the home modification firms that charge upfront fees to, among other things, verify that lenders are in compliance with all sorts of regulations,actually never end up giving you any information that could be used by you as leverage to get a mortgage modification.

Brown's warning comes despite the fact that this past October, the practice of prepaying for mortgage loan modification was banned in California. But that doesn't seem to have stopped the practice in that state and certainly has no impact on other states.

According to EIN News,quoting a consulting group called Mortgage Fraud Examiners, mortgage loan audits are nothing more than " snake oil to peddle," and refers dismissively to those who sell the product as "hucksters."

The CEO of Mortgage Fraud Examiners, Storm Bradford, is quoted as saying, " Although 'loan audits' can be of substantial value to a homeowner, regrettably, most companies providing "audits" are not qualified to do so."

Of course, MFE does have a vested interest: it does its own forensic analysis of mortgage transactions. On its Web site, it describes such an analysis as reviewing mortgage documents, looking for fraud, other tortuous conduct and common violations of federal and state statutes. The idea is to then march into your lender's office, "armed with this information" and then be better able to negotiate.

On his own Web site, California Attorney General Brown just posted Monday his warning to avoid forensic loan audits saying, "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. The foreclosure-relief industry continues to be long on promises, but short on results."

In fact, says Brown in his statement, "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 obtain loan modifications or provide any other foreclosure relief."

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think --The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years.

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