Court Halts Alleged “Forensic Audit” Scam Targeting Troubled Homeowners

The looming threat of foreclosure makes some homeowners easy targets for scammers who make hollow promises to help them keep their homes and lower their mortgages — all for a price. A U.S. District Court has pulled the emergency brake on a California-based operation alleged to be selling pricey “forensic audits” intended to provide relief, but which only pile on more troubles for consumers.

According to the Federal Trade Commission, which had petitioned the court for the freeze, the website for the audit company claimed that “up to 95% of mortgages may be legally unenforceable due to defects like lost documents, improper notices, appraisal and/or predatory lending.” The defendants said that because of these defects, homeowners had leverage to negotiate lower mortgages and mortgage payments.

For $1,995 to $2590, the company would provide these so-called “forensic audits” of the mortgage loan documents to determine whether lenders complied with state and federal mortgage lending laws.

“After our examinations, lenders suddenly get religion and become much more cooperative in renegotiating,” the defendants’ websites declared.

Once a potential customer contacted the company, the FTC says they were often told:

*to stop contacting the lender because it would hinder the negotiation process and, sometimes, to stop making monthly payments;

*that there was a 100% chance that the defendants’ “forensic audits” would uncover violations of federal and state mortgage and credit laws, and that consumers would receive either a loan modification from their lenders or a refund from the defendants; and

*that the defendants’ negotiations with the consumers’ lenders could lower their mortgage payments by 50%.

But the FTC claims that, in spite of these purportedly awesome audits, customers often never received loan modifications or reduced payments and often found out from their lenders that the defendants either never contacted them, or did contact them but failed to follow up.

The defendants also allegedly failed to answer or return calls and e-mails from customers looking for updates on their mortgage modifications. Those customers who requested refunds never received them.

The company is accused of violating the FTC Act and the Mortgage Assistance Relief Services (MARS) Rule, by misleading consumers into thinking they could renegotiate their mortgages, and that failure to get a lower mortgage would result in a refund of the cost of the audit.

A second alleged MARS Rule violation involves the collection of fees for mortgage foreclosure rescue and loan modification services before homeowners have accepted a written offer from their lender.

The company’s website has been taken down and its assets are now frozen.

You can see the full order (PDF) HERE.

Earlier this year, the FTC charged a California man of running three website that offered similarly bogus relief services, including “forensic audits.”

The agency has some advice for avoiding this type of scam.
If you’re looking for foreclosure prevention help, avoid any business that:

  • guarantees to stop the foreclosure process – no matter what your circumstances are
  • instructs you not to contact your lender, lawyer or credit or housing counselor
  • collects a fee before providing any services accepts payment only by cashier’s check or wire transfer
  • encourages you to lease your home so you can buy it back over time
  • recommends that you make your mortgage payments directly to it, rather than your lender
  • urges you to transfer your property deed or title to it
  • offers to buy your house for cash at a fixed price that is inappropriate for the housing market
  • pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.

Comments

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  1. Blueskylaw says:

    We GUARANTEE that we might be able to stop foreclosure on your home. All we ask is that you DON’T call your attorney, your mortgage lender or your State Attorney General.

    I said okay as I quietly slipped them $3,000 while looking over my shoulder and seeing if I was being followed.

  2. Costner says:

    It is great they can shut these people down, but what about those responsible? They should be facing serious jail time and ALL of their assets should be seized, but in many cases the same people just open up shop under a new name and start the scams all over again.

    I don’t care if they are a corporation or not… we are being told corporations are people, and thus we should be able to arrest them right?

  3. Warren - aka The Piddler on the Roof says:

    Instead of just halting this BS, hows about putting some names and faces online so people know who these douche nuggets are?

  4. dush says:

    Hey you, stop paying your bills. That will help get your bills resolved faster. Trust me.

  5. JayDeEm says:

    I actually know someone who hired this company, and recommended at the time that I do the same (I didn’t). His description of their process was almost word-for-word identical to what is stated in the article. All I remember was that he was initially very optimistic about the process for the first month or two, but became pretty withdrawn and stressed out over the next 6 or so months and *never* talked about how things were proceeding. He spent a lot if time and energy deflecting blame for his financial woes on members of the opposing political party, various politicians, and the other scapegoats we see thrown around in this conversation. My guess is that he realized that it was a scam and his pride severely damaged.

    He is a very different, and much less pleasant person these days, though we still talk from time to time. He is still in the house, but not because of anything this company did for him. He eventually defaulted on the second mortgage and the bank wrote it off because they would have lost even more money on a foreclosure.