What is a Forensic Mortgage Audit | Forensic Audit
What Is a Forensic Audit?
Do I really want to do this? What is a Forensic Audit anyway? Do I really even need one?
When most people hear the term “audit”, they think of IRS agents and tax fraud. A forensic audit, however, is usually commissioned by private parties and, while not associated with the IRS, can have very serious criminal and legal consequences. This article will help you understand the uses, players and ramifications of this important process.
The Definition of A Forensic Audit
A forensic audit is an examination of an organization’s or individual’s economic affairs, resulting in a report designed especially for use in a court of law. A forensic audit is similar to the tax audits performed by the IRS; both strive to establish a comprehensive picture of an entity’s finances (assets, liabilities, total income, cash flow). However, while a tax audit is intended to determine the true size of one’s tax liability, a forensic audit can have several goals, including mapping cash flow/cash transactions, identifying accounting errors and enumerating total assets.
When Are Forensic Audits Used?
Forensic audits are used whenever lawyers or law enforcement officials need reliable data on a party’s financial status or activities. For example, while reaching a divorce settlement, a lawyer may request the presiding judge to permit a forensic audit to uncover assets that one spouse is trying to hide.
If you want to sue a auditor (or the accounting firm) for negligence, you would request a separate forensic audit to determine how much the botched job cost you.
In Business
If an elected official is accused of accepting bribes, the FBI could set up a forensic auditing team.
Forensic audits are sought by CEOs, chief financial officers or board members who suspect embezzlement within the company.
Who Performs The Audit?
Forensic audits are performed by special class of financial experts know as forensic accountants. This class includes certified fraud examiners (people with bachelor’s degrees or equal professional experience who have a background in accounting, prosecuting fraud, loss prevention or criminology/sociology who pass the CFE test); CPAs; or Chartered Accountants (the United Kingdom version of a CPA).
What Is The Methodology?
Forensic auditors begin by taking all the accounts, inventories, assets, capital and other economic elements and determining how they should work together.
To use a hypothetical example, if an auditor sees that a business grosses $10 million a year, he assumes that the profits, cash, new capital, inventories, taxes, payroll, rent and other costs add up to $10 million. He then looks at the profits, cash, et al. and checks how they ought to interact (e.g. in some cases, there is an systemic overlap between certain values, which the accountant would make note of so as not overcount). Once he had collected all of the reported values (as well as caveats), he would establish an ideal model for how the each side of the balance sheet should read.
What Happens After The Audit Is Complete?
Once completed, the report is sent to the appropriate authorities and recorded as evidence. While its completeness and objectivity are certainly important, a forensic audit report’s most useful attribute is the summary of results. Finance is a highly technical disciple; to accommodate this complexity, accountancy has adopted an precise lexicon. As such, an unscrupulous defense attorney could exploit the average juror’s ignorance of such terminology to discount audit results that are actually compelling.
Luckily, chartered accountants specializing in forensics understand finance as well as criminal law. This allows them to translate audit results into language useful to prosecutors trying to build a case.
What is a Forensic Mortgage Audit
A Forensic Mortgage Audit is a concise examination of loan documents that were compiled for an approval and servicing of a mortgage. How concise they are, depends on the firm doing them. I can’t speak for them but I can speak for myself. I examine as much I can get my hands on. I examine the initial application, appraisal, lender file, final title company file and whatever the client has in their possession.
Once I have these documents, I look for things that violate TILA, RESPA, HOEPA, HMDA, ECOA and other federal regulations. We also look for items that violate state law as well and we look to see if the Loan Officer and/or Broker are properly licensed. We even look to see if they have any felony convictions that may be relevant.
How Important Is a Forensic Audit For A Loan Modification
A Forensic Audit quite often is the single most important aspect of any Loan Modification. A Forensic Audit provide leverage and spells out penalties and violations your lender might have done in originating your loan. If you intend to sue your Lender, then a Forensic Audit can help tremendously in negotiating with your lender. So much so, it is most likely your lender would be will to settle out of court.
1. TILA Violations – Forensic Audit Will Reveals This
Right of Rescission – The rescission right is absolute for 3 days, but it is extended for up to 3 years if certain material TILA disclosures were not provided correctly at the time of the original credit transaction or a proper notice of the right to cancel was not given. The creditor must give each consumer 2 copies of a notice of the right to rescind. If you were never notified of your Right To Cancel, certain TILA disclosures were not accurate, or if your tried to Cancel and were not allowed to, you maybe eligible to have your loan canceled if you refinanced less than 3 years ago.
APR and Finance Charge Violations – Incorrect disclosure of these numbers could allow you to cancel!
TILA violations can have very severe consequences for the lender up to and including having the homeowner receive the property FREE and CLEAR!
2. Mortgage Was Improperly Sold – Forensic Audit Will Reveals This
Because the people who acquired your mortgage and made it into a security changed the mortgage agreement without your permission and made the mortgage unusable. They don’t have a right to enforce the mortgage agreement you granted. You made a deal, if you don’t pay the mortgage, a SPECIFIC party can take your house away from you. You didn’t say ANYONE could take your house away from you.
Despite the fact the creditor is owed the money, the creditor does have the right to foreclose. Our Program is designed to let everyone know the creditor does not have the right to foreclose and compel the creditor to workout an alternative payment arrangement.
When you create a mortgage, you create 2 documents. The note and mortgage. The note is the IOU and the Mortgage is the legal agreement that gives the right to take your house away if you don’t pay. When you failed to pay, the party that purchased the Note tried to use the mortgage to foreclose. However, when the party “securitized” the mortgage, the added new conditions and new parties that you unaware and didn’t agree making the mortgage agreement unenforce-able. So, although you still owe the money to the other party, they cannot use foreclosure to take your home.
3. Predatory Practices (i.e., Non-Repayable Loan, Fraudulent Appraisals, etc.) – Forensic Audit Will Reveal This
Certain homeowners received loans that they were never able to repay, had inflated appraisals, or other potentially fraudulent activity. Our program runs tests on your mortgage documents to see if your loan meets these criteria.
Do I need to be behind?
No!
How is an audit different than a loan modification?
A loan modification is where you ask the lender to change the terms of your mortgage so your payments can become more affordable. For example, they could lower your rate to 3% and/or extend your term to 40 years or so.
An audit does not modify the loan terms, but it does make it much easier to get them modified.
Why should anyone do an audit to lower their payment?
Audits work to lower payments because it gives power to the homeowner. The lender will now be much more willing to negotiate with them for better terms now that they have presented these violations. The homeowner is now in the driver’s seat!
Will this impact my credit?
Depending on your situation, it could actually help your credit because the lender must stop reporting to credit agencies once they acknowledge their violations.
What if I am in foreclosure and I want to sell my home?
A successful audit can give you all the time you need to find the right buyer.
Can an audit help if I have received a sale date?
Yes. However, you may need to have an automatic stay filed if your date is less than 60 days away!
Can the mortgage audit help me if my home has already been sold?
Yes, as long as you live in a state that allows for a redemption period, you can still challenge your lender and stop the sale from being completed!!
You could also use the audit results to sue the lender for damages and remove any negative reporting on the credit report regardless of your state laws.
IMPORTANT NOTE:
What organization completes the Audit?
Homeowner purchased audits are completed by Human Rights International, LLC. an IRS approved non-profit (501 c(3)application Pending). Homeowner audits may be tax deductible.
Human Rights International, LLC (HRI) is a non-profit organization. It has a very impressive mission and its total offering to Homeowners is UNMATCHED by ANY other organization that offers this type of service.
