loan workout

What is “Dual Tracking”?

February 19, 2013

Dual Tracking

We have many people ask us, “What is Dual Tracking?”  Some have heard this term on the news and are wondering what it is.  Well, to explain Dual Tracking, I would briefly refer to The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).  Basically, The Dodd-Frank Act was a bi-partisan bill that was signed into law by President Obama on July 10, 2010.  The Act was intended to “clean up Wall-Street” and to directly address those things that the mortgage lenders were doing that got us into the housing mess, including the housing bubble and crash – and the resulting economic recession.  Sounds like a good thing, right?  Well, we think it is.

Part of what Dodd-Frank did was establish the “Consumer Financial Protection Bureau” (CFPB) which we have discussed here in our blog, and on our Facebook page, The Consumer Law Insider.

In addition to creating the CFPB, Dodd-Frank authorized the new Bureau to act as a “Watchdog” over institutions that offer consumer financial products and services.  The Dodd-Frank Act imposed new requirements on servicers and gave the Bureau the authority to both implement the new requirements and also to adopt additional rules to protect consumers.

Under the Act, the CFPB is charged with ensuring that consumers are protected from unfair, deceptive, or abusive acts or practices from the inception of a mortgage through to the loan servicing.  For example, the CFPB has already standardized the mortgage document disclosures so that they are more easily understandable and straightforward, forging on toward its stated goal of promoting transparency in the credit market.  The Bureau also overseas Mortgage Servicers (the company that collects your payments) to prevent unfair and deceptive practices as well.

That’s Great.  But, What is Dual Tracking?

Well, the authority of the Consumer Financial Protection Bureau not only covers mortgage servicing, but also extends to the practices of the servicer and lender in foreclosure situations to ensure that consumers are treated fairly.

And, the 2013 REAL ESTATE SETTLEMENT PROCEDURES ACT (REGULATION X) MORTGAGE SERVICING FINAL RULES, (which we will just call, “the final servicing rules”), were enacted in January, 2013.  Those final servicing rules restrict the practice of “Dual Tracking”.

According to the CFPB, “Dual Tracking”  is when a mortgage servicer, is simultaneously evaluating a consumer for loan modifications or other alternatives at the same time that it prepares to foreclose on the property.  (Finally!)

The final servicing rules make it unlawful for the mortgage servicer to lead a consumer down one track where they think they are being considered for a “foreclosure alternative”, i.e. a loan modification, short sale, or some other “loan workout”, when the consumer is also heading down another track to foreclosure.

Dual Tracking

The data compiled by the CFPB revealed that many consumers who thought they were doing what the servicer asked were being caught off guard when they were served with foreclosure paperwork.  The homeowner would call the lender or servicer and ask for help, as they were either behind or about to get behind on their mortgage payments.  In response, the servicer would tell them to submit an application for a “non-foreclosure option” that included a complete financial disclosure, and the consumers would comply and then wait 8, 10, 12 months … with no response.  Maybe, the servicer would claim that there were “missing” documents or something wasn’t signed correctly and the application would have to be re-submitted anew.  After months and months of back and forth, the homeowner realizes they were in fact heading down a track leading nowhere.  And by that time, it’s too late to stop the train.


The good news is that the CFPB has enacted the Final Servicing Rules, part of which addresses the practice of “dual tracking”.  The rules require loan servicers to notify homeowners of the various home retention options available in a reasonable period of time after default, process their applications for loss mitigation/home retention in a timely manner including notifying the homeowner right away if something is missing from the file, and notify the consumer of the decision of the investor (the bank, trust or other “owner” of the debt) within a reasonable time.   The “loss mitigation” departments at the loan servicer now must communicate with the individuals in charge of handling the foreclosure action in court and inform them not to go forward with the foreclosure until certain criteria are met with the servicing file and the homeowner’s request for a non-foreclosure option.

The bad news is that the Final Servicing Rules don’t go into effect until January, 2014.  Until then, the only option for consumers who have been victim to this unfair practice, is to file a lawsuit.  And, this is not an issue that a homeowner could successfully raise in a foreclosure defense action in North Carolina, as this would be out of the Clerk’s jurisdiction at a foreclosure hearing.  A claim of Unfair or Deceptive Trade Practices in North Carolina, in this context, must be raised in an affirmative lawsuit.

PS.  The Consumer Financial Protection Bureau has a great website (my source), lots of information and a great demonstration of transparency in government.  Go visit and read more about Dodd-Frank and the CFPB.

If you feel you are a victim of “dual tracking”, and would like a free consultation with one of our attorneys, fill out the questionnaire below, and someone will respond to you within 24 hours.