What happens when you are in the middle of modifying your mortgage only to find out your bank is still foreclosing on your home?
Summary: After predatory lending gave us the biggest market "correction" since the Great Depression banks began to mitigate their losses by attempting to fast track foreclosures. Dual tracking is when the bank moves forward with foreclosing even though you have already began to secure a loan modification.
After predatory lending gave us the biggest market "correction" since the Great Depression, banks began to mitigate their losses by attempting to fast track foreclosures. Thus was born the process known as “dual tracking”. Dual tracking is when the bank moves forward with foreclosing on your home even though you have already began to secure a loan modification.
In early 2013, the Consumer Financial Protection Bureau (CFPB) wrote new rules restricting dual tracking. A loan servicer cannot start a foreclosure proceeding if a borrower has already submitted a complete application for a loan modification (or other alternative to foreclosure such as a short sale) and that application is still pending review.
To give borrowers reasonable time to submit such applications, servicers cannot make the first notice or filing required for the foreclosure process until a mortgage loan account is more than 120 days delinquent.
While it is not a complete bar to dual tracking, it makes additional hurdles for the loan servicer’s to jump through. Additionally, Loan servicers must let borrowers know about their “loss mitigation options” to retain their home after borrowers have missed two consecutive payments. They must provide them a written notice that includes examples of options that might be available to them as alternatives to foreclosure and instructions for how to obtain more information.
If a loan servicer has already started the foreclosure process, it cannot move for a judgment or order of sale or conduct a sale of the house if the homeowner submits a complete loss mitigation application more than thirty-seven (37) days before the foreclosure sale. If a homeowner’s loss mitigation application is denied, a loan servicer must send a notice stating the “specific reasons” for the denial of each loan modification option. When a loss mitigation application has been denied, the homeowner may appeal that determination if the complete application was received 90 or more days before a foreclosure sale (or within the first 120 days of delinquency). The homeowner shall be given at least 14 days.
The State of New York also has some strong laws on the books regarding foreclosures. The NY Codes, Rules, and Regulations, Title 3, Chapter III, Subpart B. Part 419.11 (k) states:
A Servicer must develop and implement policies and procedures to provide notification to its foreclosure attorneys and trustees regarding a borrower's status for consideration of a loss mitigation option and whether the borrower is being evaluated for, or is currently in, a trial or permanent modification. A Servicer should avoid initiating a foreclosure action if the borrower has requested and is being considered for a loss mitigation option or if the borrower is in a trial or permanent modification and is not more than 30 days in default under the modification agreement. A Servicer must also develop and implement policies and procedures to ensure that its foreclosure attorneys comply with the requirements of New York Civil Practice Law and Rules section 3408 with regard to mandatory settlement conferences in residential foreclosure actions, including that their attorneys are fully authorized to resolve the foreclosure action and to negotiate with the borrower in good faith to reach a mutually agreeable resolution of the action, including a loan modification, if possible, and that its attorneys bring to the settlement conference relevant documents and information, including the payment history, an itemization of the amounts needed to cure and pay off the loan, the mortgage and note and, if the plaintiff is not the owner of the mortgage and note, the name, address and telephone number of the legal owner of the mortgage and note. 3 NYCRR § 419.11
What does this all mean? It means that you can stall the foreclosure process for a long time while you work out your options on how best to try to save your home. Just Because You Fall Behind and the Bank Starts Foreclosure Doesn't Mean You Lose. The truth is that many banks do not bring foreclosure proceedings the correct way, and you have powerful state and federal laws that can protect you. Most people do not know them. Be sure to contact an attorney today to discuss all of your options. You have options. Don’t let them take your home away without a fight.
(Originally written 3rd September 2013 by James Cracolici at http://cracolicilaw.blogspot.com/2013/09/what-happens-when-you-are-in-middle-of.html)
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