A recent suit filed against CitiMortgage has questioned the effectiveness of new rules providing protection for homeowners facing foreclosure. After the mortgage crisis, the Consumer Financial Protection Bureau (CFPB) enacted new laws to protect homeowners during foreclosure proceedings. These new laws specifically prohibit dual tracking, but it appears that at least one mortgage lender is still engaging in this practice.
What is Dual Tracking?
Dual tracking is when a mortgage lender moves forward with foreclosure proceedings while simultaneously processing the homeowner’s loan modification application. During the mortgage crisis, many homeowners lost their homes to foreclosure, even though they were in the process of obtaining a loan modification. In 2014, the CFPB banned the practice in response to the mortgage crisis. Dual tracking has also been prohibited by many states.
Under the new CFPB rules, a mortgage lender cannot initiate foreclosure proceedings until the homeowner has failed to make adequate payments on his or her mortgage for 120 days. Moreover, a mortgage lender cannot move forward with foreclosure proceedings while a loan modification application is pending. The theory is that the additional 120 days give homeowners a reasonable amount of time to begin a loan modification application.
Homeowners may also begin loan modification applications after foreclosure proceedings have been initiated to stall the foreclosure process. Under CFR 1024.41(a), homeowners may submit applications up to 37 days before a foreclosure sale. Mortgage lenders must cease the foreclosure process until:
- Notice is sent to the homeowner that they are not eligible for the loan modification and the homeowner has exhausted his or her appeals options after denial of the loan modification,
- The homeowner rejects the modification offered, or
- The homeowner fails to comply with the terms of the modification i.e. by not making payments.
Under the Real Estate Settlement Procedures Act (“RESPA”), a homeowner may bring a lawsuit for dual tracking violations if the above requirements are not met.
Williamson v. CitiMortgage
Cheryl Williamson filed suit in Connecticut under RESPA and other Connecticut state laws prohibiting dual tracking. According to Ms. Williamson’s complaint, CitiMortgage initiated foreclosure proceedings against Ms. Williamson in 2012 when she fell behind on mortgage payments. Ms. Williamson, however, was tentatively approved for a loan modification in October 2014. On January 26, 2015, Ms. Williamson received the loan modification documents and accepted the terms that day. The last day for Ms. Williamson to redeem by making a full payment to stop the foreclosure was February 3, 2015.
After presenting evidence of the facts above, the court overseeing the foreclosure proceeding initiated by CitiMortgage dismissed the case. The actions of CitiMortgage caused Ms. Williamson to miss work for count hearings. Moreover, Ms. Williamson suffered from severe anxiety and stress during this process due to the fact she has depended siblings with disabilities that rely on her. Thus, Ms. Williamson filed the current lawsuit against CitiMortgage alleging violations CFR 1042.41(g) and other state laws.
Will Ms. Williamson Win this Lawsuit?
To prevail under CFR 1024.41(g), the homeowner must meet the deadlines set forth in the statute, submit the appropriate documents and comply with the loan modification rules. Based on the alleged facts, it is likely that Ms. Williamson has met these requirements, and thus, has a viable case against CitiMortgage.
But, the case should put homeowners on notice that mortgage lenders may still be practicing dual tracking. If you are facing foreclosure proceedings, it is advisable to consult with an attorney to ensure that the proper procedures are being implemented.
Authored by Robin Sheehan, LegalMatch Legal Writer