Forensic Loan Audits – Do You Need One?

When you see or hear the term “forensic” it is usually in connection with a story or show about criminal activity. They use “forensics” to gain evidence and convict the criminal or to determine how a crime was committed.

One of the definitions of the word is: “Relating to or dealing with the application of scientific knowledge to legal problems.”

We think the word “detailed” might be more appropriate than “scientific” in a Forensic Loan Audit, but the purpose is nearly the same: to gain evidence in order to determine if a crime has taken place.

What is a Forensic Loan Audit?

It is a comprehensive and detailed audit/examination of every document related your mortgage contract – from the good faith estimate all the way through the closing documents and beyond. The audit’s purpose is to determine whether a lender has violated any federal, state, or local laws with regard to a mortgage loan. As he or she reviews the documents, the auditor will be searching for violations.

A forensic loan audit will reveal if there have been violations of the Real Estate Settlement procedures Act (RESPA), the Truth in Lending Act, the Home Owner Equity Protection Act, and others. The auditor will also look for signs of predatory lending, forgery, violations of good faith estimate compliance, and other misrepresentations of any kind.

Following the Forensic Loan Audit the auditor will present his or findings in writing, with an analysis and recommendations for loan modification terms and short sale negotiations.

In cases where fraudulent activity has been discovered, audits have helped homeowners tremendously. Some homeowners have even had their loans forgiven entirely. But these are not the norm.

The reason these cases make the evening news is that they are unusual. Most audits find no evidence of fraud – so don’t spend money on a forensic loan audit in hopes something will pop up. Only order a forensic loan audit if you honestly feel that there is something not quite on the up-and-up about your San Diego home mortgage.

Finding discrepancies may or may not help your cause in negotiating a loan modification or a San Diego short sale. While some bank negotiators might be swayed by the results of an audit, others will simply be annoyed. Often you are more likely to gain their cooperation by allowing us to negotiate without mention of it.

Of course, if your audit turns up solid grounds for legal action against the lender, that’s a different matter. You may not need to worry about the bank’s negotiator. Just be aware that few audits do find errors of that severity.

I’ve been successfully handling San Diego area short sales for 10 years now – and my success record at keeping homeowners out of foreclosure stands at 98%. So if you own a home in California and need to sell short, get in touch.

You can reach me by calling 619-929-1413 or writing td@tomdunlap.com.

A word of caution: If you decide to have an audit, do your homework before choosing an auditing firm. Use Google, get references, and proceed with caution. The current economy has spawned a variety of crooks waiting to prey on homeowners who are in distress. Some of those predators call themselves Forensic Loan Auditors.


Please note that the information provided on this short sale page is generic, academic information used for general information purposes and may not be construed as or relied upon as a promise for a specific outcome.

This site provides information about real estate, law, income taxes and credit scores as relates to borrowers in distress, short sales and similar situations. The site is designed to help users safely cope with their own needs. Information is not the same as advice — the application of law or regulations to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer, tax adviser or other specialist if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation. The models in photographs accompanying the testimonials on this website are used for illustrative purposes and are not a personal endorsement.