U.S. Loan Auditors Scam

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     U.S. Loan Auditors and similar outfits are promising to conduct “forensic audits” of mortgage transactions to find evidence of “predatory lending” and fraud, and use that evidence to haul lenders into court and obtain new mortgages at far more favorable interest rates, officials say.

     In October, California Attorney General Jerry Brown sued U.S. Loan Auditors, its legal arm My U.S. Legal Services and the companies’ owners for $60 million, accusing them of scamming hundreds of homeowners out of anywhere from several thousand dollars to, in one case, $55,000. The suit demands civil penalties, restitution for victims and injunctions to block the company from making false claims.

Questions:

1. Do you think the name of the company is what has inspired trust by so many homeowners? Explain.
2. Based on the article, how do you think the scam works? What were U.S. Loan Auditors’ business model and claims? Explain why you think U.S. Loan Auditors has been so successful in bilking homeowners. Present your answer in terms of the fraud triangle.
3. “A spokesman for Brown’s office said no gag order has been imposed.” What is a gag order?

Source:

Wright, D., E. Harper, F. Biberica, and J. Siegel. (2010). Officials: New Foreclosure Scam Preys on Desperate Homeowners, ABC News.com (Retrievable online at http://abcnews.go.com/US/officials-foreclosure-scam-preys-desperate-homeowners/story?id=12260372&page=1)