Homeowners Beware: Forensic Loan Audit Scam

mortgage scamThe calls started last November. Speaking in Spanish, a representative from New Century Solutions in Lake Forest, Calif., pitched Jose Chirino to purchase a forensic loan audit. For $2,995, the representative said, an audit could help the San Jose, Calif., homeowner get a much-desired loan modification and principal reduction. Chirino, who works for Santa Clara County, said no, but New Century called again -- and again, and again. After about 20 such calls, Chirino finally agreed and sent $1,500 to start the process in January.

In a written contract, New Century said an attorney would review and advise Chirino, draft a demand a letter, and negotiate with his lender. And then, nothing happened.

He's not alone. Hundreds of organizations have cropped up over the last two years offering forensic loan audits, often linked to professional attorneys and auditors. They promise to review a homeowner's mortgage loan documents to determine whether the lender complied with state and federal lending laws, and expedite a loan modification request. While the audit may indeed reveal errors in loan documents, the process very rarely results in a loan modification or rescind.

Thousands Have Been Scammed

In 2010, the Federal Trade Commission issued its first alert about the bogus auditing practice. That year, the Better Business Bureau had no complaints filed in its category for forensic loan audits. But in the first eight months of 2011, the BBB said it filed 50 complaints in that category, with more than half of them against Accelerated Equity & Development, Inc., and Tila, LLC.

Since 2008, the FTC has seen a jump of more than 300 percent in mortgage foreclosure relief and debt management complaints, and last year received more than 28,580 for the category that includes all mortgage-related issues. The not-for-profit Homeownership Preservation Foundation, which operates a national free counseling hotline, receives 4,000 calls a day for housing help, and between 100 to 150 of those callers identify themselves as victims of a mortgage scam, says Josh Fuhrman, the organization's senior vice president of community affairs.

"They lure consumers to believe that by hiring them for a review of a loan modification package, they can expedite the process and get better results, or they make false promises that they can get a loan mod or principal reduction," says Fuhrman. "Homeowners are not typically getting any results. [Scammers] are just stringing [homeowners] along, or they disappear."

Fighting Back

By March, Chirino started to wonder why hadn't heard anything from his lender. He contacted the audit organization, which pressured him to pay the remaining $1,495, he said. After a few rounds of back-and-forth with the company -- and still no movement on his primary mortgage -- Chirino contacted a local nonprofit, the Fair Housing Law Project, for assistance. With the help of a volunteer attorney, he drafted a demand letter in July and was able to recoup his $1,500 from New Century. Separately, he was able to obtain a loan modification through a HUD-approved housing agency, and today remains in his house, where he lives with his wife and daughter.

Like so many mortgage scams, this one was based on a kernel of truth: Chirino says that his original 2006 home loan from Countrywide -- which has since been accused of widespread lending violations -- may have marked him as a potential scam target. But the difference between what New Century Solutions promised -- a loan audit and modification -- and what it delivered -- nothing -- is the hallmark of the scams that continue to plague distressed homeowners. Homeowners, burned once by bad mortgages, are now getting burned again as scammers try to milk their distress for profit.

New Century Solutions did not return several calls for comment on Chirino's case.

Read the full story at DailyFinance.

See also:
Fannie Mae Allowed Widespread Robo-Signing, Report Says
Viewpoint: Feeling Guilty About Buying a Foreclosure?

Home Sellers Step In Where Banks Fear to Tread

Read Full Story

Find a home

Powered by Zillow