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I wrote earlier on the reasons why our forensic loan audits consistently find construction loans as the most fraudulent and toxic loans in the industry. In this article, I am going to talk more about why we commonly are able to identify and outline fraud in our forensic loan audits of mortgages so that a homeowner can sue for relief.

Standard forensic loan audits commonly reveal missing and clearly erroneous documents. Unfortunately, they typically miss fraudulent documents put together by industry insiders to appear innocent. A computer program can test the APR and figures of your mortgage, and will likely spit out that your computer-generated documents are fairly accurate.

However, it takes an experienced human eye with mortgage origination and appraisal experience to understand and recognize fraudulent schemes and documents. It is my decade of personal experience in mortgages combined with an appraiser with over a decade of experience that give us an edge in identifying fraud.  One common fraud we find which no computer will catch is an appraisal not being prepared properly, or which parties that knowingly failed to disclose property flipping. There are many other common schemes that I can identify from the overall picture given from records, documents, and your story that a computer analysis of your loan will not uncover.

I recently performed an audit of someone in foreclosure with a major lender. I examined the loan and found a few missing documents and inaccuracies. However, after reviewing records, documents, and the story of the homeowner, I realized and was able to pinpoint how the damages and current foreclosure situation originated with fraud surrounding a previous loan that was refinanced and paid off which resulted in an inflated loan amount. With this information, I was able to steer his attorney in the right direction to find relief.

Finding relief for homeowners in our forensic loan audits is our goal. Missing documents and inaccuracies are signposts that point the way to find relief, but understanding the complete situation from a position of experience and knowledge is why we are able to help so many people. We don’t just look for inaccuracies in core mortgage documents; we look for sources of relief for homeowners.

If you are in need of mortgage litigation support or mortgage forensic audits to help keep your home, contact me here. If you are a lawyer looking to provide your clients with better service and an improved chance of keeping their home, contact me here.

I have performed forensic loan audits on numerous construction loans and helped many of homeowners and financial institutions identify and recover from fraudulent construction loan schemes. Out of all the loan types that I perform forensic loan audits on, construction loans repeatedly amaze me by how commonly I find fraud, and by how large the variety of fraudulent schemes there are. In this article, I will go over why construction loans are riddled with fraud, and help homeowners who have been damaged by construction loans.

In 2006, construction loans were represented by government studies as being virtually free of any suspicious activity. So how is it that loans that appear so angelic and pure end up being described by Deutche Bank as “without doubt, the riskiest commercial real estate loan product”?  In August of 2010, USA Today reported, “the Congressional Oversight Panel, a financial watchdog, has warned that construction loans have deteriorated faster and inflicted bigger losses on banks than any other real estate loans.”

The answer to why these seemingly good loans are revealed to be riddled with fraud once analyzed by a forensic loan audit starts with the origination process. When builders approach financial institutions, they aren’t looking for a single loan with a single set of fees that an average homeowner looks for. They are looking for dozens of loans spread out over years and tens of millions of dollars of total loans with millions of dollars of fees and interest.

Shortcuts, fraud, and poor underwriting decisions stem from greed and competition for tens of millions of dollars in loans and millions of dollars in perceived profit. Many financial institutions willingly performed fraud and looked the other way for profit.

So why didn’t the government agencies detect the overwhelming fraud and put a stop to this? Part of this is a lack of regulator training and oversight. A larger part was allowing financial institutions to audit their own loans and report suspicious activities only when they desire, called

Suspicious Activity Reports (or SARs).  Because of a lack of federal oversight, Suspicious Activity Reports (SARs) by financial institutions “are one of the government’s main weapons in the battle against money laundering and other financial crimes.” Apparently letting the fox guard the henhouse isn’t the best of choices…

So construction loans became the most toxic and fraudulent loans in the industry, while appearing in government studies as the best loans in America.  I’ve seen fraud in appraisals, escrow accounting, lot switching, builder contracts, funds disbursement, budgeting, flipping, sales disclosures, and unique multiparty construction loan conspiracies.

So how does this help homeowners facing foreclosure or damaged by fraudulent construction loans? The forensic loan audits I perform on construction loans commonly identifies fraud, the resulting damages, and the documentation needed to prove it clearly for a lawsuit. My audits include a review of your appraisal by a licensed appraiser, as well as a review of all the related contract and loan documents. With ten years of experience in the mortgage origination and auditing field, I simply know what to look for.

If you are in need of mortgage litigation support or mortgage forensic audits to help keep your home, contact me here. If you are a lawyer looking to provide your clients with better service and an improved chance of keeping their home, contact me here.

I recently prepared a forensic loan audit that emphasized the importance of properly recognizing and the prevalence of fraud in a mortgage audit to cover up sloppy or missing documents.

This forensic loan audit I wrote was on behalf of a borrower who was foreclosing within the month. The borrower was considering bankruptcy. The borrower had a first mortgage around a million dollars and a second mortgage of a few hundred thousand dollars. The borrower’s property is worth several hundred thousand dollars. To a bankruptcy lawyer it would be a simple slam-dunk, strip off the second mortgage in bankruptcy as an unsecured lien due to lack of equity. Unfortunately, as the borrower could not afford the first mortgage, even stripping the second in bankruptcy would ultimately result in foreclosure.

My eye caught something different. I found evidence of clear-cut fraud on the first mortgage that was used to cover up lender sloppiness.The fraud and sloppiness will very likely result in the first mortgage being treated as an imperfect lien and unsecured debt and becoming dischargeable in bankruptcy under local state statutes. Now instead of eliminating the second mortgage, the borrower can declare bankruptcy and eliminate their million dollar first mortgage, while the second mortgage becomes the new secured first mortgage. Now they will probably be able to remain in their home.

So just how sloppy are lenders?

One recent study by researchers and lawyers found that in roughly half of bankruptcy mortgage proceedings, lenders fail to provide required documents to the bankruptcy court. Many of these documents are lost, improperly prepared, or many never existed. Lenders typically turn to fraud to cover up their deficiency.

So why aren’t bankruptcy attorneys catching all of these errors? Simply put, many lack proper expertise in examining documents for fraud, which is built by experience of how mortgage processes work. It just isn’t efficient to have an expert in law examine mortgage documents. Others simply lack the time required, due to the huge influx of new bankruptcies. This is where a trained forensic loan auditor like myself comes in.

When I find mortgage fraud by lenders, it provides borrowers and lawyers yet another tool to provide relief to a troubled home. If you are in need of mortgage litigation support or mortgage forensic audits to help keep your home, contact me here. If you are a lawyer looking to provide your clients with better service and an improved chance of keeping their home, contact me here.