“Dual tracking” happens when a loan servicer starts or continues with a foreclosure even though you're in the process of working out an alternative, like a modification.
In the past, it was common for the servicer to go forward with a foreclosure sale while at the same time leading the homeowner to believe that a loan modification was forthcoming. Often, a foreclosure sale happened before the modification process ended and the homeowner ended up losing the property.
Now, though, federal laws and some state laws prohibit dual tracking under specific circumstances.
Federal Law Prohibits Dual Tracking
The Consumer Financial Protection Bureau (CFPB), which the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established, issued mortgage servicing rules that, after being codified into federal law, went into effect on January 10, 2014. Among other things, the laws prohibit a servicer from foreclosing on a borrower while also working on a loan modification agreement or other alternative to foreclosure. (12 C.F.R. § 1024.41).
Foreclosure Can’t Start for 120 Days
Under federal law, a servicer is prohibited from starting a foreclosure in most cases until the borrower is more than 120 days' delinquent on the mortgage obligation. This 120-day time period gives the borrower sufficient opportunity to prepare and send a loss mitigation application to the servicer. (“Loss mitigation” is the process of working out an alternative to foreclosure, like a modification, short sale, or deed in lieu of foreclosure.)
If a borrower sends in a complete loss mitigation application, the foreclosure can't officially start until the servicer finishes reviewing the application and:
- the servicer denies the borrower's request for an alternative to foreclosure and any appeal period expires
- the borrower rejects the loss mitigation option that the servicer offers, or
- the borrower breaches a loss mitigation agreement, like by failing to make the trial-period payments.
Foreclosure Sale Can’t Go Ahead While a Loss Mitigation Application Is Pending
If the foreclosure has already started and the borrower sends the servicer a complete loss mitigation application more than 37 days before a foreclosure sale, the servicer can’t ask a court for a foreclosure judgment or order of sale, or hold a foreclosure sale, until one of the three events described above happens.
Servicers Must Give the Protections of the Loss Mitigation Laws to Some Borrowers More Than Once
As of October 19, 2017, if a borrower brings the loan current any time after sending in a complete loss mitigation application, the servicer has to comply with these laws again if the borrower submits another loss mitigation application. Previously, a servicer was only required to evaluate a borrower for a loss mitigation option and comply with these laws once over the life of the loan.
Some States Have Laws Forbidding Dual Tracking
A few states (for example, California, Colorado, Minnesota, and Nevada) have laws that forbid dual tracking. Under these states' laws, the foreclosure process generally must stop after a borrower submits a complete loss mitigation application until the servicer reviews the paperwork.
Send a "Notice of Error" Letter and Consider Talking to an Attorney
If your servicer has dual tracked a foreclosure while concurrently evaluating you for a modification, you may send the servicer a “notice of error.” Under the federal Real Estate Settlement Procedures Act (RESPA), if you send your servicer a notice of error letter about dual tracking, the servicer must respond and fix the problem within 30 business days of receiving the letter or before the foreclosure sale date, whichever is earlier.
However, the CFPB has found that borrowers often don't receive appropriate protection from dual tracking and servicers’ foreclosure attorneys sometimes don't take adequate steps to delay foreclosure proceedings or sales.
Talk to a Lawyer
If a foreclosure sale in your case is looming and the servicer is dual tracking, it's highly recommended that you contact a foreclosure attorney immediately to get advice about what to do in your particular circumstances. An attorney can help you enforce your rights under both federal and state law. Just sending a notice of error letter to the servicer probably won't be enough to stop a foreclosure.