There are several things a home owner can do who may be facing a financial hardship/ foreclosure.
If that person were truly put into a loan they could not afford when it adjusted and the homeowner did not know about it they may be able to look thru their loan docs and find violations. The problem is can the home owner 1) afford to go thru with the lawsuit, 2) have enough equity to make the loan whole if it were recinded. the homeowner has 3 years from the date of the closing to find any violations and could possibly recind. However they then have to be able to refi and give the lender back the case they received. Not possible for the most part.
What a audit may be able to help with is getting a loan mod approved. If the home owner got a loan they could not possibly afford and the loan is "unconsionable" you have to have an attorney help get the loan modified. Some forensic auditing places charge upfront for the audit then tell you you have to get an attorney. I had a potential client try to do this but didnt want to pay for the help he needed.
As an attorneys office when doing a loan mod and sending in proof the client should never have gotten the loan we have been successful in getting a fixed interest rate the client could afford sometimes a principal reduction but not always.
The home owner does have the responsibility of know they can or can not afford a payment however the loan officer and realtor have the fiduciary duty not to put that owner in a home they cant afford.
Loan modifications do work, a lot!! Most of the time the borrower is listening to friends who give them bad advice. dont make your payment or tell the lender your debts are higher than they really are. They need to understand that even though they are not having their credit score looked at the payment still needs to be affordable.
With all of the programs available the lender can 1) reduce interest rate to as low as 3% for freddie, fannie FHA. 2% for conventional making home affordable mods.
Then they can extend the term of the loan to 40 years. Freddie Fannie and FHA do not do principal reductions. HOwever on other mods a principal reduction or forebearance may be necessary to get the payment to 31% of the gross.
Modifications do happen, it is critical for the homeowner to submit a correct financial hardship in the first place.
If the mortgage payment is more than 31% of the borrowers gross income,
they obtained their mortgage before 1/1/09
they live in the residence
and the loan is below $729,000 they may qualify for the Making Home Affordable Mod which does not require a cash contribution by the borrower.
However I have done mods for people who owe more than $729,000 and have equity. It can and does happen.
I do belive that a homeowner should first try a modification then if not approved consider a short sale.
Some people are led to belive that mods dont happen, they do. If the homeowner submits paperwork correctly they have a much better chance.
You also need to call the lender at least once per week to find out the status.
Best of Luck
Volo Law Group
925 699 5041