Since loan modification companies are slowly going legit or slowly dying off, “new and improved” loan audit companies are sprouting up.

Here is the common scenerio.  Loan audit company provides a “forensic loan audit” to customer for $1,500.00.  We will leave the utility of a forensic loan audit to another post.  The company then refers the customer to an “affiliated” attorney who will charge around $2,000.00 to pursue a loan modification using the forensic loan audit.  The attorney claims that the audit is ammo to use to negotiate a loan modification.

A loan audit is a legal analysis of loan documents to see if the origination of a loan had a defect, specifically under the Truth In Lending Act.  The entire premise of the audit is to determine if a federal law has been violated.  If this is not the practice of law, I’m not sure what is.

California, that I know of, has yet to make it clear to the public that loan audits may only be accomplished by an attorney.

Other states have already taken it upon themselves to litigate these.  Both the Attorney General in Florida and Tennessee have filed civil suits for such a claim.

Nontheless, I have used this basis of the unauthorized practice of law to disgorge the profits of companies who have illegally collected a fee from clients to provide such services.

On another note, in my experience and confirmed by other attorneys in the business, loan audits are no magic bullet to produce a successful loan modification.

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