The California Attorney General joined the California Department of Real Estate (DRE) and the State Bar of California in warning Californians to avoid forensic loan audits, 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,” the AG said. “The foreclosure-relief industry continues
to be long on promises, but short on results.”
Individuals and businesses who offer forensic loan audits use inflated and
misleading claims to convince 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 obtain loan
modifications or provide any other foreclosure relief.
“The State Bar is committed to dealing with all aspects of loan
foreclosure fraud involving attorneys,” said State Bar 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 the Attorney General’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.
The AG 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.
The DRE has 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 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,”
stated Real Estate Commissioner Jeff Davi. “With consumer education
efforts and warnings, we hope to keep consumers from falling victim in the
first place.”
As part of the consumer alert, the AG 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 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.
