Anyone familiar with using Forensic Loan Audits? (Possible deficiency relief?)

Foreclosures, Short Sales, Tax Foreclosures
1

I just spoke to someone that does forensic loan audits. They basically review the details of the original loan and search for any violations against the borrowers, such as over-stated income, assets, etc.

If they find violations, they can pursue litigation against the lender to either forgive the homeowner for debt, reduce principal, rates, or in extreme cases… remove the lien entirely and have the homeowner own the home outright (extreme cases according to him).

I’m considering using this service. I have an excellent short sale approval right now, but it is only a lien release and not a forgiveness of debt. This was a $430k loan given to a 22yr old, 100% financed… and a few months later he got another loan for $550k, 100% financed. The $550k loan already went into foreclosure.

If I can have them do an audit, find some violations, have an attorney send a letter to the lender stating that if they don’t forgive the homeowner for the underlying debt… then we will pursue litigation, then maybe they’ll agree to debt forgiveness along with the lien release?

What are some thoughts on this type of audit?

2

I’m skeptical. Back in the '80’s they called this lender liability, just trying to push off the borrower’s obligation or losses on the lender. If the auditor is looking for overstated income or similar fraud then the buck stops with the borrower. Its the borrower whom signs the loan application stating that everything on there is true and correct under penalty of law, not the loan officer.

3

Full Disclosure. I am not an lawyer BUT…even to a layman those loans send off a bad smell.

IF all of the info submitted by the borrower is provably true, income, job status, resources, etc then I would consider the possibility that this young person was placed in loans that are unsuitable for him.

I would love to hear an expert legal opinion concerning the culpability of the loan officer/ bank in making loans they know are not appropriate even if the paperwork on their side is technically correct.

There is a huge case to be made …and lots of money…deep pocted law firm filing a class action in this regard.