I am in the middle of foreclosure. The mortgage servicer has recorded a notice of default and set a foreclosure sale date. I am preparing a loan modification application through HAMP. Is it too late to stall the foreclosure if I submit the application now?
It depends on who your servicer is. Dual tracking -- the practice of initiating or continuing with a foreclosure while simultaneously considering a homeowner’s loan modification application – is prohibited by California law and the National Mortgage Settlement. But you may have to submit your loan modification by a certain time in order for the dual tracking ban to kick in.
If your mortgage servicer is Bank of America, Citi, JPMorgan Chase, Wells Fargo, or Ally/GMAC, then you must submit a complete HAMP application at least 15 days before the scheduled foreclosure sale. For all other mortgage servicers, as long as you submit a complete loan modification application before the sale, your servicer must stop the proceedings.
When the National Mortgage Settlement (NMS) Prohibits Dual Tracking
In late 2012, 49 state attorneys general entered into a settlement with five of the biggest mortgage servicers in the nation -- Bank of America, Citi, JPMorgan Chase, Wells Fargo, and Ally/GMAC. The settlement arose out of a lawsuit against those banks alleging abusive practices against homeowners in foreclosure. As part of the National Mortgage Settlement, the banks agreed to follow new rules in the foreclosure process.
One of those rules prohibits dual tracking. Specifically, if a homeowner submits a complete loan modification application at least 15 days before a scheduled foreclosure sale, the mortgage servicer is prohibited from conducting the sale, until:
- it determines that the homeowner is not eligible for the loan modification
- the homeowner declines the loan modification offer or does not accept it with 14 days, or
- the homeowner accepts the loan modification but fails to make payments.
When the California Homeowner Bill of Rights Prohibits Dual Tracking
In the summer of 2012, the California legislature passed the Homeowner Bill of Rights (HBOR). HBOR went into effect on January 1, 2013. HBOR prohibits all servicers from engaging in dual tracking and there is no loan modification submission deadline to trigger the protections. This means that under HBOR, a mortgage servicer must halt all foreclosure proceedings once a homeowner submits a complete loan modification application, even if it’s just a few days before a scheduled foreclosure sale.
But when it comes to the five mortgage servicers subject to the National Mortgage Settlement (NMS), there’s a wrinkle. The five NMS signatories are exempt from any of the HBOR rules if they are otherwise in compliance with the standards under the settlement. This means that Bank of America, Citi, JPMorgan Chase, Wells Fargo, and Ally/GMAC can continue with a foreclosure in California when the homeowner submits an application less than 15 days before a foreclosure sale.