Opinions divided on mortgage securitization audits -- but some are worthless: Internet Scambusters #449
Fraudsters are using a documents-checking process known as a mortgage securitization audit as a means of scamming foreclosure-threatened homeowners.
Even when the process is legitimately carried out, the Federal Trade Commission suggests it's worthless. Some in the legal profession disagree.
This week, we outline both sides of the debate, but, more importantly, explain how to avoid an out-and-out scam.
Time to get going...
Mortgage Securitization Scams Add to Homeowners' Woes
Masquerading under the impressive-sounding title of a "mortgage securitization audit," a new scam is bleeding financially-pressured homeowners out of their dwindling funds.
Also sometimes simply called a "mortgage audit" or a "forensic document review," the service supposedly combs through all of the documents relating to a mortgage, looking for mistakes or even frauds in those documents.
The purported aim is either to help homeowners escape foreclosure or to strengthen their case for a loan modification, which will ease their repayments.
And that sounds like a pretty good idea, except for two things:
- Many so-called mortgage securitization companies actually do nothing at all but collect a couple thousand dollars from their victims.Or maybe, they'll produce an impressive looking set of documents that are actually publicly available and have no legal value.
- The Federal Trade Commission (FTC), the nation's consumer watchdog, has publicly denounced the use of mortgage audits, even if they're done properly and legally.
It's only fair to point out here that some lawyers disagree with the FTC. They maintain that a securitization audit, done at the right time and under the direction of an attorney, does help to strengthen a homeowner's hand in a foreclosure fight.
One can imagine this seeming to make sense, since any evidence that a lender has behaved incorrectly would surely weigh on a homeowner's side.
But then, we're not lawyers, so we can't really argue that one.
What's certain is that those who say the practice is worthwhile insist that you should hire a specialist attorney first and let them decide what audit work needs to be done.
You shouldn't take the opposite route, they warn, of starting off with a firm or individual offering mortgage audits.
One lawyer argued in a recent blog that mortgage audits "are a necessary and essential element to a successful foreclosure defense" and that in every successful case he had handled a mortgage audit and securitization analysis had been "at the foundation of the success."
But he adds: "Let me make it very clear that an audit is not the first step to mounting an effective foreclosure defense." And he warns that many so-called mortgage auditors provide inadmissible evidence while charging around $2,000 for their service.
Moe Bedard, who founded the online consumer advocacy community LoanSafe.org, takes an even stronger stance. He says a lot of the firms offering mortgage audits are "reincarnated loan modification frauds with a new name or they are out of work mortgage brokers working from their kitchen tables."
He adds: "These unlicensed auditors are charging from $200-$7,000 for services which are essentially worthless to a homeowner looking to stop foreclosure.
"More often than not, these firms are offering mortgage audits with no attorney representation, which is the primary reason why they can be of no help to homeowners.
"The homeowner is left with an expensive stack of papers that are essentially worthless."
(Note that we are not connected with loansafe; it is a privately operated, advertisement-supported site.)
If you opt to go down the attorney route, you should, of course, always check with your State Bar Association about the status and standing of any law firm before you deal with them.
However, before you even do that, listen to what the FTC says. In a consumer alert, Forensic Mortgage Loan Audit Scams: A New Twist on Foreclosure Rescue Fraud, the Commission warns that when "auditors" say you can use their reports to avoid foreclosure or speed up loan modification, nothing could be further from the truth.
"There is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they're conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer," says the Commission.
And they note that although it's possible under certain circumstances to sue a lender because of mistakes in loan documents, even winning the case doesn't compel the lender to modify the loan terms just to ease your payment terms.
The FTC points out that mortgage audit scams are just one of many tricks that defaulters may encounter and suggests avoiding any companies or individuals who:
- Guarantee they can halt foreclosure.
- Tell you not to get in touch with your lender or attorney and ask for money upfront before doing anything for you.
- Suggest you lease your home under some sort of buy-back program.
- Tell you to pay your mortgage to them instead of the lender.
- Make a cash offer to buy your home at a price that doesn't match current market rates.
- Present you with documents that supposedly need to be signed immediately.
Instead, the best thing to do if you're having trouble making your mortgage payments is to contact the lender and try to work out a new repayment plan. The nonprofit Home Ownership Preservation Foundation, which is certified by the US Department of Housing and Urban Development (HUD), has a help hotline on 1-800-995-HOPE, or you can go to HOPE NOW.
Footnote: We've warned of this before, but we heard recently about a mortgage scam in Nevada in which homeowners received a letter saying their mortgage had been transferred to another company to whom they should now make their payments.
It was simply untrue and, if the alleged operators hadn't been caught so quickly, no doubt many owners would have fallen for this.
The action here is simple: If you get any kind of notification about a change of mortgage owner, just get in touch with your lender and check it out with them. Of course, don't use any of the contact information given in the letter!
One way or another, the fraudsters are out to make the most of ignorance and upheaval in the house and mortgage market of the past few years. Knowing about their tricks, like the mortgage securitization scam can keep you one step ahead.
That's a wrap for this issue. Wishing you a great week!