California attorney general warns about ‘phoney foreclosure' help

SACRAMENTO
February 22, 2010 12:03pm

Distressed homeowners should avoid forensic loan audits, the loan-modification industry's latest "phony foreclosure-relief service," in which homeowners pay up-front fees for a forensic review of their lender's practices, but are provided no actual foreclosure relief, says California Attorney General Jerry Brown.

"Forensic loan audits are yet another phony foreclosure-relief service hawked by loan-modification consultants trying to cash in on the desperation of homeowners facing foreclosure," says Mr. Brown.

"The foreclosure-relief industry continues to be long on promises, but short on results," he says.

Individuals and businesses that offer forensic loan audits use inflated and misleading claims to convince homeowners to pay up-front fees for services that produce no actual foreclosure relief, the attorney general says.

The audits are pitched to homeowners as a tool they can use to gain leverage and speed up the loan-modification process. 

But Mr. Brown says that there is no evidence or statistical data to support claims that forensic loan audits -- even if performed by a licensed, legitimate and trained auditor, mortgage professional or lawyer-will help homeowners obtain loan modifications or provide any other foreclosure relief.

By law, all individuals and businesses offering mortgage-foreclosure consulting, loan-modification and foreclosure-assistance services must register with Mr. Brown's office and post a $100,000 bond. It is also illegal for loan-modification consultants and businesses to charge up-front fees for their services. 



Mr. Brown has sought court orders to shut down more than 30 fraudulent foreclosure-relief companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive loan-modification consultants.

In 2009, California accounted for 22 percent of the nation's foreclosure activity, with 632,573 homes in foreclosure statewide. This is an annual increase of more than 20 percent in foreclosure activity from 2008 and a 150 percent increase from 2007.

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