The CFPB eliminated dual tracking, which occurs when the bank simultaneously considers a modification application and moves ahead with foreclosure. These things plainly are inconsistent with one another, especially if the borrower loses the property before the bank makes a decision on the modification application.
Dual or double tracking was particularly problematic for borrowers because they often misunderstood that they were being, or could be, double tracked. They often failed to respond to foreclosure notices because the bank told them it would not conduct a foreclosure sale until it decided the modification application. To borrowers, this meant that they didn’t have to worry about the notices the bank sent, or any summons and complaint. The problem for these borrowers is that foreclosure is a process that ends with a foreclosure sale but starts with something else (the “something else” varies by jurisdiction). There are often actions that the borrower could undertake to delay the foreclosure sale but they have to take them at the appropriate time or they’re lost forever. Borrowers were lulled into inaction and then prejudiced by their inaction.
CFPB Amended RESPA Regulations to Stop Dual Tracking
The RESPA rules are contained in Regulation X, which the CFPB amended effective January 10, 2014. The amendments impacting foreclosure defense are in Subpart C, 12 CFR 1024.30 et seq. Section 1024.41 governs the loan servicer’s obligations in evaluating and responding to modification applications and contains the provisions aimed at eradicating double tracking.
Subsection (f) restricts the servicer from commencing a foreclosure unless “[a] borrower’s mortgage loan obligation is more than 120 days delinquent.” This 120-day timeframe is the “pre-foreclosure review period.” If a borrower submits a “complete loss mitigation application” during the pre-foreclosure review period, the servicer cannot commence a foreclosure process unless: (i) The servicer notified the borrower that the borrower is not eligible for any loss mitigation option and any succeeding appeal process has terminated; (ii) The borrower rejects all loss mitigation options offered by the servicer; or (iii) The borrower fails to perform under an agreement on a loss mitigation option. This is particularly significant in non-judicial foreclosure states where commencement of a foreclosure is effectively synonymous, or nearly synonymous, with completion of a foreclosure.
Subsection (g) is more significant in judicial foreclosure states because it requires the servicer to decide a modification application before taking the dispositive step in a foreclosure. It provides that if a borrower submits a complete loss mitigation application after the servicer has taken the first step in any foreclosure process but more than 37 days before a foreclosure sale, the servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale, unless: (1) There is no pending modification application or appeal of any denial of any modification application; (2) The borrower rejects all loss mitigation options offered by the servicer; or (3) The borrower fails to perform under an agreement on a loss mitigation option.