Wednesday, November 5, 2008

Forensic Review: A Tactic to Fight Off Foreclosure

by Amy Lillard

Homeowners having trouble with mortgage payments or facing foreclosure can feel ignored by lenders and desperate for solutions. But there is a way to get lender attention and improve the current financial situation.

A forensic loan review can determine if lenders made any mistakes when the mortgage was issued, mistakes that can be actionable offenses and the key to persuading lenders to help.

A forensic review involves a legal expert examining your loan documents for errors and misstatements. Commonly, the truth in lending statement given by the lender after mortgage application and the APR calculation won't match up with the HUD-1 closing cost sheet you received at closing. Even with small mistakes and tiny percentage errors, you can have cause for legal action. Other major violations to uncover could include illegal predatory lending practices or even outright fraud.

While forensic review is usually a tool of mortgage firms, the current economic climate has resulted in several companies offering review to individuals. The drawbacks could be severe - costs for legal review at San Diego firm You Walk Away can be as high as $3000. But the benefits can be significant. Review companies contend that errors are frequent, and can provide you with the leverage you need to make lenders listen and develop a solution.

Experts assert that the goal of forensic review is not to actually sue, but to gain bargaining power. David Petrovich, executive director of the nonprofit Society for the Preservation of Continued Home Ownership in Oakhurst, N.J., and the author of "Fight Foreclosure: How to Cope With a Mortgage You Can't Pay, Negotiate With Your Bank and Save Your Home," is one of these advocates. Lew Sichelman, a real estate writer for over 30 years, has covered the topic extensively in his syndicated column.

Errors in mortgage documents stem from the housing rush of the last few years, when mortgage companies couldn't push borrowers through fast enough, and often (intentionally or not) overlooked key borrower issues. In the mad dash for more money and more loans, borrowers were confused or actually hoodwinked.

Today, lenders are feeling the repercussions through the housing bust, and are under increased pressure by federal and local regulators to shape up their practices. Mortgage lenders are inundated with requests to improve current loans, and many borrowers can get lost in the shuffle. This tactic of legal review can help borrowers move their case up in the ranks, and get the help they need.

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