Despite the landmark Homeowners Bill of Rights legislation of 2012 which outlawed various dishonest lending practices, banks and servicers are still performing dual-track foreclosures in California.
For those of you not familiar with the term, “duel-tracking” occurs when a servicer engages a borrower in the loan modification application process while at the same time the trustee continues to file and record necessary documents in order to execute a foreclosure. The dishonesty surfaces when the servicer denies the loan modification application and quickly wraps up the foreclosure process before the unwitting borrower figures out what hit them. Pretty slimly right?
The Homeowners Bill of Rights created a new set of procedures allowing a borrower to file an appeal within 30 days of the denial of a loan modification offered by a major servicer. If appealed, the servicer must either deny the appeal and wait 15 days before proceeding with the foreclosure, or grant the appeal and wait 14 days after the offer is declined before proceeding with the foreclosure, whichever is later.
It’s a little confusing but here is the important part: if the servicer so much as records a notice of default during the loan modification application or appeal phase, it is subject to an injunction stopping the foreclosure and attorneys fees regarding the injunction if it’s granted. Worse yet, if a trustee’s deed upon sale is recorded during the loan modification application or appeal phase, the bank, servicer or trustee shall be liable for actual damages and the greater of three times the amount of the actual damages or a flat $50,000 – whichever is greater – if the court finds that the perpetrator acted intentionally or recklessly.
You might be thinking that with such serious penalties, we would likely not see a duel-track foreclosure in California in the next century. But think again. I recently filed a lawsuit against a major servicer for recording a notice of sale while the appeal of the denial of my client’s loan modification application was still being considered by the servicer. I fully expect that my client will prevail on the issue.
If you have been served with a notice of sale or a trustee’s deed upon sale while your loan modification application is still pending or is awaiting the decision of your appeal, you may be eligible for relief under this new set of protections. Call me for a consultation and I will evaluate whether your servicer and trustee are duel tracking you.