Dual Tracking: Homeowners Suffer Foreclosures While Banks Lose Little
Although homeowners continue to struggle with their mortgage payments and
try to avoid foreclosure, many banks see nothing wrong with concurrently pursuing
foreclosures against borrowers who are seeking loan modifications. This controversial
practice, called dual tracking, seems less like a smart business tactic
and more like a way to punish homeowners working to keep their homes.
While both federal regulators and various state officials work to curb
or ban the practice of dual tracking, consumers should be aware that lenders
may sell their homes before modifying their loans.
Practice of Dual Tracking
Some borrowers who are in default on their mortgages want to proactively
work with their lenders to try to save their homes, so they seek loan
modifications. However, some banks, with or without their borrowers'
knowledge, continue to pursue foreclosures against these homeowners, even
putting their houses up for sale before the loan modification approval
process is complete. While lenders defend this dual tracking method as
a way to protect their investments, consumer advocates and regulators
feel it misleads homeowners during an already confusing and frustrating time.
Borrowers may still achieve
loan modifications, regardless of the dual tracking practice. In 2010, banks completed around
1.24 million proprietary loan modifications. About 513,000 of these loan
modifications were done through a governmental modification program. One
of the major issues with these numbers, however, is that most modifications
are proprietary, so the tracking ban instituted under the Obama administration's
foreclosure relief initiative program last year does not apply. In the
meantime, homeowners attempting a proprietary loan modification must deal
with the complications that dual tracking presents.
Regulator v. State Actions
In April of this year, federal regulators in the banking industry announced
they had made several deals with major banks that included improving the
process of stopping foreclosures when loan modifications are approved.
While these settlements attempted to broach the subject of dual tracking
practices, many advocates felt the regulators could have pushed banks
harder with reforming the use of this tactic. Currently a coalition that
includes state attorneys general and various federal agencies is working
to overhaul the foreclosure system and institute a total ban on dual tracking
for all banks.
Until the foreclosure system is overhauled, current borrowers in default
on their mortgages who are considering applying for loan modifications
should beware of the practice of dual tracking. Lenders sometimes make
qualifying for loan modifications difficult, or banks have two different
departments handling the simultaneous loan modification application and
foreclosure process, which creates more opportunities for miscommunication.
If you are currently in default on your mortgage and would like to know
more about your legal rights and options with regard to loan modifications
and foreclosures, contact a local attorney experienced in defending these
matters to ensure you are not lost in the dual tracking nightmare.