Tuesday, March 26, 2013

Dual Tracking Reforms and What They Mean for Homeowners

Near the beginning of 2013, the Consumer Finance Protection Bureau (CFPB) issued new rules to prevent dual tracking, a process by which homeowners are simultaneously in the process of seeking a loan modification while their mortgage servicer moves forward with a foreclosure.

What is Dual Tracking?
The California Monitor described this process as “the race between foreclosure and loan modification.”  For example, if you’ve submitted a loan modification application on March 1st, and you find out that your mortgage servicer begins foreclosure proceedings on March 10th—without reviewing your loan-modification application—then you’re experiencing dual tracking.  In effect, dual tracking can increase the number of foreclosures that could have been prevented through loan modification programs.
How Do the New Rules Work?
The new rules came about to make sure that homeowners are treated fairly by their mortgage companies and to ensure that borrowers are informed well in advance of the possibility of foreclosure proceedings.
Prior to the CFPB’s issuance of these rules, the 2012 National Mortgage Settlement already included terms to help prevent dual tracking.  For example, under the National Mortgage Settlement, certain dual-tracking reforms can apply to your loan if you meet the following criteria:
·      You have a mortgage through Bank of America, Citi, GMAC/Ally, JPMorgan Chase, or Wells Fargo
·      Your loan is strictly for the home in which you currently live
·      You have already submitted a loan modification application, or you’ll submit one if you can’t make your mortgage payments
These reforms apply to loans owned by Fannie Mae and Freddie Mac, but if your mortgage servicer isn’t one of the banks listed above, under the terms of the Mortgage Settlement you’d have to rely on state laws to help with dual-tracking problems.  The Illinois Supreme Court issued new rules in 2013 to aid struggling home owners with some of the problems that cannot be immediately addressed, or that aren’t covered by the 2012 National Mortgage Settlement.
When the CFPB promulgated its new rules in 2013, it issued a press release that described these legal protections for homeowners.  They include:
·      Restrictions on Dual Tracking—now, mortgage servicers cannot begin a foreclosure when the borrower has submitted a completed loan-modification application.  In addition, mortgage servicers have to wait for a mortgage payment to be delinquent by 120 days before it sends a notice of foreclosure proceedings.  This is intended to give borrowers adequate time to ask for help with a loan modification.
·      Information about Foreclosure Alternatives—mortgage servicers are required to inform borrowers in writing about “loss mitigation options” once they’ve missed two consecutive mortgage payments.
·      Easy Access—borrowers must have easy access to mortgage-servicer employees whose jobs are to help struggling homeowners.  These personnel are designed to inform homeowners about the status of “loss mitigation” applications and other documents.
·      Consideration of all Foreclosure Alternatives—the mortgage servicer must consider all feasible alternatives, prior to foreclosure, in order to “help the borrower retain the home.”  These alternatives can include payment deferment and loan modification.  In addition, a foreclosure sale can’t occur until all other alternatives have been considered.
In addition to these protections for homeowners, the CFPB rules also are intended to make sure there are “no surprises” and “no runarounds” for borrowers.  The rules are set to take effect in January 2014.
In the meantime, if you have questions about loan modifications, dual tracking, or other ways to avoid foreclosure, an experienced foreclosure defense attorney can answer your questions today.
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