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FORECLOSURE AND BANKRUPTCY

Can Mortgage Audits Stop Foreclosure?

Written By:
May 12, 2010 at 5:16 PM

Have you heard that mortgage audits can stop foreclosure? Did you wonder if it's true? Well, wonder no more. It is true, and here follows information to help you determine whether or not a mortgage audit is right for you.

What is a Mortgage Audit?

A mortgage audit is, as the name suggests, an audit or a close examination of your loan documents and procedures. The findings will reveal to lenders and borrowers any violations in the initial funding of a mortgage agreement. The forensic loan audit evaluates whether a lender violated the Truth in Lending Act; made any errors in the closing documents; or neglected to disclose the terms of the loan adequately.

This may be helpful to a borrower who is behind on mortgage payments and facing foreclosure.

Who Performs the Mortgage Audit?

A mortgage audit is best performed by accredited professionals, such as a real estate attorney or a financial professional. There are certain companies which advertise the service of mortgage audits to stop foreclosure. Look for these in the yellow pages or online under "mortgage auditors." Unfortunately, there are many companies which offer this service which are scam artists. It is yet another way to take advantage of desperate people who need help keeping their homes - not help losing more money. Be careful to perform a due diligence background check of any company you consider sending your money to for this service. In lieu of hiring a professional or company, you may also audit your own mortgage documents.

How Does a Mortgage Audit Work?

The foreclosure process officially begins when you have been served with a Summons and Complaint by the bank or lender. Once this occurs, you (the defendant or mortgagee) are required to provide an Answer to the bank (the plaintiff or mortgagor) in a certain number of days (usually within 15 days of receipt of Summons and Complaint). It is important to follow all rules and regulations of the court, and to give great attention to details. For one company's step-by-step plan to answer the complaint and proceed to challenge the foreclosure and perform a mortgage audit, see this article at Bank Fraud Victim Center. You would be well advised to contact a reputable attorney to help you with this legal process.

Mortgage Audits Can Stop Foreclosure?

The mortgage audit will reveal whether violations have occurred against the Truth in Lending Act (TILA), Home Ownership and Equity Protection Act (HOEPA) and Real Estate Settlement Procedures Act (RESPA). For example, the U.S. Department of Housing and Urban Development (HUD) requires that loan originators provide borrowers with a "Good Faith Estimate" that clearly discloses closing costs and key loan terms. HUD also requires that closing agents provide borrowers with a HUD-1 settlement statement. There are a host of rules and regulations under these acts which your lender was required to follow. Any one of those rules or regulations may have been violated without your knowledge.

If it is found that you were the victim of predatory lending practices, you or your attorney may argue that your mortgage is void and that 100% of the payments you have made must be applied to principal only – with none applied to interest. You may also sue for damages.

During the mortgage audit, if you or your attorney finds that illegalities or errors occurred in the mortgage documents or loan process, your attorney will be better positioned to negotiate a loan modification on your behalf. The findings of the audit may be used as evidence to support loan modification negotiations, or even to support the argument that an original loan with violations is not enforceable; therefore, any foreclosure based on those faulty calculations is not enforceable.

Negotiate a Loan Modification without Mortgage Audit

It is possible to negotiate a loan modification without resorting to the mortgage audit option. The Obama Administration’s Making Home Affordable Program (MHAP) features opportunities for mortgage refinancing or loan modification to make your payments more affordable. MHAP also offers the Home Affordable Foreclosure Alternatives Program. This is for homeowners who prefer a short sale or deed-in-lieu of foreclosure. HUD counselors will advise you for free at 1-888-995-HOPE (4673).

References:

HUD.gov: RESPA

Making Home Affordable

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