Under the Consumer Finance Protection Bureau’s (“CFPB”) new rules, dual-tracking – when the servicer moves forward with foreclosure while simultaneously working with the borrower to avoid foreclosure – is restricted.
- Servicers must consider and respond to a borrower’s application for a loan modification if the application arrives at least 37 days before a scheduled foreclosure sale.
- If the servicer offers an alternative to foreclosure, it must give the borrower time to accept the offer before moving for foreclosure judgment or conducting a foreclosure sale.
- Servicers cannot foreclose on a property if the borrower and servicer have come to a loss mitigation agreement, unless the borrower fails to perform under that agreement.
- Finally, the servicer cannot move forward with a sale or judgment on the property if an appeal of a denial is pending.
Before the new CFPB regulations existed, thousands of Florida borrowers were losing their homes to foreclosure auctions while their files were in “underwriting.” The banks’ lawyers would push the sales forward while the banks’ loan modification departments sat on the files. Homeowners who could qualify for a loan modification were losing their properties through no fault of their own.
The CFPB regulations have put an end to that specious practice. If you turn in your loan modification package 37 days before the dispositive foreclosure judgment (motion for summary judgment/trial) or sale, said judgment hearing or sale should not go forward. If it does, the homeowner has a private right of action for damages against the bank. The banks are aware of this so they typically do not fight us if there is evidence that a loan modification package has been submitted.
We have used the CFPB regulations to cancel dozens of trials and hundreds of sales for borrowers who are awaiting for an answer from their lender or appealing a denial. It has turned out to be a powerful tool to help us protect our clients from foreclosure.