Forensic Loan Audits: An Important Tool In Fighting Foreclosure


Considering that a startling 90% of mortgages have some sort of error that could potentially make them void, or at the very least cost the bank considerable money in fines and damages to correct, the loan audit is a crucial tool in negotiating with your bank for a loan modification. Common errors include:

Incorrect Interest Rate

RESPA and TILA require that lenders disclose the cost of borrowing money to all borrowers before the borrower commits to the contract. Especially in the case of subprime loans and loans with teaser rates, you may have been shown one interest rate on the documents you signed, but the interest rate you are actually being charged could be quite different.

Junk Charges

A junk charge is any charge that has no legitimate basis or does not add anything of value to the processing of your loan documents. For example, on top of charging you a document recording fee for recording your new Deed of Trust at the County Recorder’s Office, your broker also charges you a document filing fee. Such a fee only serves to further line your broker’s pocket and adds no value to your transaction.

Undisclosed Broker or Loan Officer Compensation

Especially in the case of subprime loans, many brokers received compensation in the form of yield spread premiums, which means that they were compensated a percentage of the loan amount for originating a higher interest loan.  As of this writing, yield spread premiums are not in and of themselves illegal as long as they are disclosed to the borrower. Most brokers did not disclose their yield spread premium compensation.

The first step in getting a loan audit is to gather your loan paperwork together. If you don’t have it, you can sent a Qualified Written Request to your servicer requesting copies of your loan documents. Your servicer must acknowledge receipt of your Qualified Written Request within 20 business days of its receipt and must correct any errors within 60 business days.

Once you have your documents, you can hire a loan auditing company to look them over for violations. If any are found, and unless you’re one of the lucky 10% whose loan documents are pristine, you will have an excellent bargaining chip to use against your servicer when negotiating a loan modification.

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6 Responses to “Forensic Loan Audits: An Important Tool In Fighting Foreclosure”

  1. Storm says:

    Most loan audit companies are scams. We exposed this problem a year ago in a press release entitled “Beware of the Latest Foreclosure Rescue scam–Loan Audits.”

  2. Kathy McGraw says:

    Hi Storm:

    It is interesting that you say that most loan audit companies are scams when you link to a loan audit website.

    A loan audit is very different from a loan modification. An audit, used correctly, can be a tool to help a homeowner gain some leverage with the servicer to push for a modification.

    As a rule, no one should trust any company that claims to be able to guarantee a loan modification. There is no such thing. However, legitimate loan modification firms can help people who don’t know enough to pursue the matter themselves, and as I said above, the loan audit is a tool that can be used to help effect a positive result.

    The best choice for anyone who needs help getting a loan modification is to go through NACA. There is never any fees for help through NACA and they’ve helped millions of homeowners keep their homes.

  3. Storm says:

    There are no “legitimate loan modification firms.” Also, the comments about NACA are B.S. as well.

    Sorry, but you clearly have no clue, like I said, most loan audit companies are scams, and you’ve proven it by your comments.

  4. Kathy McGraw says:

    I’m leaving your comments and your links in tact, but please try and read the comment before replying back.

    1: The website you’re linking to ( does loan audits, so for you to say most loan audit companies are scams is a bit disingenuous, don’t you think?

    I’m quoting from your own website now (emphasis, mine):

    “Discrepancies are found in the majority of mortgages audited. It will expose serious non-disclosure violations, accounting “errors,” fraud and other schemes of dishonesty. With proof in your hands, you can choose to move forward and turn the tables on your predatory lender. Obtaining a Forensic Appraisal and Forensic Document Analysis is elemental to every Loan Modification, Short Sale, and Deed in Lieu of Foreclosure The findings in our Forensics can significantly improve the opportunity for a positive resolution to the homeowner.”

    It is legitimate for you to say “most loan audit companies are scams but we’re not and we can prove it to you, or here’s how we’re different.” It is not legitimate for you to say “most loan auditing companies are scams and then link to a loan auditing company. That tactic is a bit underhanded.

    2: As I stated, had you read my comment, any company that guarantees you a specific outcome is a scam. That said, there are legitimate firms out there that do help people. I am not willing to say “most” or “all” loan audit firms and loan modification firms are scams because that is an overstatement. Are there scam companies out there? Certainly! One of the ways to spot one is to look for guarantees of specific results. This applies to loan audit companies and loan modification companies.

    3: It’s fine if you think NACA is “B.S.” but the simple fact is that they’ve actually helped save people’s homes…for FREE. No fees, ever. Plus they provide loan auditing services for their clients as well at no cost. Just so you know, I am NOT a NACA affiliate or representative. I am just reporting back what I know from what I have seen and read over the Internet and from talking with people who have been though the program.

    All of that said, I hope your company provides excellent loan auditing services as I do think that loan audits are crucial in the loan modification process.

    Thanks for reading my blog and taking the time to comment!

  5. Matthew C. Kriner says:

    nice article thx

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