A Forensic Loan Audit is a process that involves examining all of your loan documents.  The purpose of the Audit is to "tell the story" of your loan so than a competent attorney can take this information and use it to your advantage, by either negotiating a Loan Modification or filing a lawsuit to stop a foreclosure or institute some other type of legal procedure.

There are two types of Audits:

• Low Level or TILA/RESPA Audit -  This audit is the "typical" audit that most companies d0.  It is software based, and it looks primarily for Truth In Lending and RESPA violations.  The purpose of this audit is to attempt to achieve "rescission" of the loan.  Rescission means that you cancel the loan.  The problem with rescission is that to cancel the loan, the borrower must be able to "tender an offer", of all money borrowed from the lender, minus all costs of the loan and all payments.  The outcome is to"restore" all parties to a state of being prior to the loan being taken out.  The problem with this method is that in California, most homeowners, for various reasons, have no ability to tender this offer.  Therefore, rescission is ineffective, and Lenders know this.
• Predatory Lending Audit -  This audit is the "High Level" audit.  The purpose of the audit is to determine everything that happened regarding the loan.  It identifies not just TILA/RESPA violations, but also numerous other violations designed to allow attorneys to file lawsuits to stop foreclosures and to win damages.  There are very few companies who can do a "quality" Predatory Lending audit.  This is because to do such an audit, one has to be familiar with court processes and the thinking of lenders and their defensive posturing. The LFI audit is a Predatory Lending Audit, designed to assist attorneys in the lawsuit.  It is a "Living Audit", constantly being revised due to the increasing case law and also due to LFI developing new tactics and legal challenges for attorneys.

The single most important way to determine whether you have been the victim of Predatory Lending or mortgage fraud or deception is through the use of a Forensic Loan Audit. To effectively perform an audit, the auditor must be part detective and part mind-reader. A single residential real estate file can be covered by numerous consumer protection laws and regulations at both the State and Federal level. The applicability of any of these laws will depend on various factors that may, or may not, be evident in the loan file.

The audit is done by a professional familiar with the loan process, forms, regulations, lender practices and loan officer practices. However, most important is that he be familiar with the various laws.To develop a competent "Predatory Lending Auditor", it takes from 4-6 months. This is because each audit is done by hand, no use of automated software that was originally designed by lenders to show "compliance" with TILA/RESPA so that the lender could sell the loan to Wall Street.

All loan documentation, lender and broker, is reviewed to determine the terms of the loan, compliance with Federal and State Laws, fees, fraud, deception and whether bait and switch might have occurred.  Additionally, LFI will also review the Foreclosure Documents and Poolingand Servicing Agreements for applicability.  LFI knows of only two other companies that do the same.

Finally, the results of the Audit are compiled in a summary. This will list all the details of what was expected to happen and what did actually happen. It will cover all discovered violations.  The results are then forwarded to your attorney for review.

Fraud

Fraud can consist at many different levels. It might just be the loan officer lying about the terms of the loan, to falsifying loan applications and income, to outright forgery, backdating of documents, and almost anything other item that you can think of.

Fraud and Negligent Misrepresentation

Were any representations, statements, or comments, written or oral made by the loan officer, broker, notary or anyone else which contradicted the terms of the documents?  Were the loan documents clear definative, or could they lead a reasonable borrower to another conclusion as to the terms of the loan?

Breach of Contract

The note and its attachments are a contract. The broker must follow all the terms of the contract such as the way the interest is calculated, and the penalties it assesses. Were there any terms in the contract which the lender failed to follow? LFI sees this constantly in a certain type of loan from a specific lender.

Lack of Good Faith and Fair Dealings

Did the lender or broker negotiate or approve the loan with your own interests being considered?

Unfair and Deceptive Acts and Practices

An analysis of various factors in the loan process or even the loan documents that could be actionable under UDAP Codes.

Yield Spread Premium

LFI's own unique approach for attacking the payment of Yield Spread Premium to brokers.

Negative Amortization

Another LFI innovative approach for attacking Negative Amortization loans.

Foreclosure Process

Review of the complete foreclosure process.  LFI has determined that up to 30% of all foreclosures in CA are likely unlawful and can be negated with the right attorney.

The final step in the Audit will be the report issued to you. It will consist of the following:

Final Loan Audit Report

• Results report of all factual findings of the forensic audit
• Any and all applicable federal law violations
• The real terms of your loan
• Outline of hidden fees and/or commission earned by your broker or lender
• A complete assessment so you can pursue possible legal claims against your broker and/or lender

How To Select An Auditor

As a homeowner, this is the most important part for you.  There are many people claiming to do Forensic Loan Audits, but they have no true idea what they are doing. They use software that they plug "the numbers" in, and push a button, and it prints out the results.  This is not a true audit.

What to ask when "interviewing" an auditor.

1. Is the audit done by hand? Or by software?
2. How long has he/she been doing audits?
3. How did he/she get started doing audits?
4. Background of the person.......testified in court?  Previous position?
5. Actual knowledge of statutes, codes, court cases.
6. How he/she supports the attorney after the audit is done?
7. Attorneys or other references. Relationships.
8. "Philosophy" towards audits and loan modifications.
9. What the end result to be expected.  This is a trick question.  If the "auditor" starts to say you will get "this and this" run fast.  There are no guarantees.

The importance of asking these questions is that everything is changing daily in the battle against the lenders.  New strategies and legal courses are being developed, with the intention of bringing the lenders "to the table".  Many of these new findings and techniques are the result of the competent auditor, who is constantly doing research to improve his audits, applying new case law and theories.  If the auditor is not engaged in this, then he is not a true auditor.