Dual tracking is an illegal practice where the mortgage servicer attempts to proceed with a foreclosure sale while a complete loan modification application (which was submitted at least 37 days before the scheduled sale) is still under review. A homeowner can stop foreclosure if the servicer engages in dual tracking. However, a homeowner cannot indefinitely avoid foreclosure by simply submitting endless applications. Under rules promulgated by the Consumer Financial Protection Bureau, a homeowner is often only entitled to a decision on one single application. In other words, duplicative requests do not bar a servicer from proceeding with a foreclosure sale. Courts that have analyzed the issue have held that a loss mitigation application is not duplicative if the prior application was decided under a different servicer, or if it was submitted prior to January 10, 2014.

Rule Against Dual Tracking

In 2010, Congress enacted the Dodd–Frank Wall Street Reform and Consumer Protection Act, which, inter alia, granted rule-making authority under the Real Estate Settlement Procedures Act of 1974 (RESPA), 12 U.S.C. § 2601, et seq., to the Consumer Financial Protection Bureau (CFPB). Pub.L. 111–203 (July 10, 2010), 12 U.S.C. §§ 5491, 5511, 5512, 5513; 15 U.S.C. § 1639d. The CFPB subsequently promulgated a rule, effective January 10, 2014, amending Regulation X of RESPA. The rule, which is subsection 1024.41(g) of Regulation X, provides:

Prohibitions on foreclosure sale. If a borrower submits a complete loss mitigation application after a servicer has made the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process but more than 37 days before a foreclosure sale, a servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale, unless: (1) The servicer has sent the borrower a notice pursuant to paragraph (c)(1)(ii) of this section that the borrower is not eligible for any loss mitigation option . . . .

12 C.F.R. § 1024.41(g) (2014). This prohibited practice – proceeding with a foreclosure sale while processing a complete loan modification application submitted at least 37 days before the scheduled sale – is known as dual tracking.

While this article is limited to explaining how dual tracking may be used as a foreclosure defense, it is worth noting that dual tracking may also form the basis of a lawsuit. Stated otherwise, the illegal practice may not only stop a foreclosure, it may also allow the homeowner to outright sue the bank for a jury award. This is because 12 C.F.R. § 1024.41(a) provides, “A borrower may enforce the provisions of this section pursuant to section 6(f) of RESPA (12 U.S.C. 2605(f)),” and 12 U.S.C. § 2605(f)(1) provides that a mortgage servicer that engages in dual tracking is “liable to the borrower” for “any actual damages.”

Duplicative Requests

A homeowner may not abuse the legal system by filing an infinite number of complete loss mitigation applications. This is because 12 C.F.R. § 1024.41(i) does not require the servicer to consider “duplicative requests.” As of October 19, 2017, § 1024.41(i) provides:

Duplicative requests. A servicer must comply with the requirements of this section for a borrower’s loss mitigation application, unless the servicer has previously complied with the requirements of this section for a complete loss mitigation application submitted by the borrower and the borrower has been delinquent at all times since submitting the prior complete application.

As such, if a servicer reviewed a prior loss mitigation application and denied a modification, or if the servicer granted a modification but the homeowner never made any timely payments under the modification, then the servicer is not required to wait until it processes further applications before scheduling a foreclosure sale.

However, under the clear language of § 1024.41(i), if the servicer did grant a prior loan modification, and if the homeowner made at least one timely payment thereunder, then the servicer must render a decision on a least one subsequent complete loan modification application if such an application is submitted by the homeowner. Such a subsequent application would not constitute a duplicative request. Under such circumstances, if the servicer were to proceed with a foreclosure sale without first rendering a decision on the application, it would be guilty of dual tracking.

Loss Mitigation Under A Prior Servicer Does Not Render A Loss Mitigation Application Under A Subsequent Servicer Duplicative

A servicer cannot claim that a loss mitigation application is duplicative if the prior loss mitigation application was decided under a prior servicer. The CPFB’s Official Interpretation to § 1024.41(i), provides, “A transferee servicer is required to comply with the requirements of § 1024.41 regardless of whether a borrower received an evaluation of a complete loss mitigation application from a transferor servicer.”

At least two federal courts have recognized the CFPB’s official interpretation. First, in Garmou v. Kondaur Capital Corp., No. 15-12161, 2016 WL 3549356 *3 (E.D. Mich. June 30, 2016), the court stated:

While it is true that a “servicer is only required to comply with the requirements of [12 C.F.R. 1024.41] for a single, complete loss mitigation application for a borrower’s mortgage loan account,” 12 C.F.R. 1024.41(i), the agency has interpreted this to apply to transferee servicers as well, stating that “a transferee servicer is required to comply with the requirements of section 1024.41 regardless of whether a borrower received an evaluation of a complete loss mitigation application from a transferor servicer.” 10 C.F.R. Pt. 1024, Supp. I. When interpreting administrative rules, courts give deference to an agency’s construction of its own regulation, which is “controlling unless ‘plainly erroneous or inconsistent with the regulation.’ ” Auer v. Robbins, 519 U.S. 452, 461 (1997) (quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 359 (1989)).

Secondly, in Dent v. Inv. Corp. of Am., No. 15-cv-11268, 2015 WL 9694807 *5 (E.D. Mich. Dec. 23, 2015), the court ruled, “Mortgage servicers thus may not escape their duty to address loan modification requests by simply noting that such requests were made to a prior servicer.”

A Loss Mitigation Application Reviewed Prior To January 10, 2014 Does Not Render A Subsequent Application Duplicative

Most federal district courts that have dealt with the issue have ruled that § 1024.41(i) is not retroactive, meaning that a decision on a complete loss mitigation application prior to the effective date of § 1024.41(i) – January 10, 2014 – is irrelevant for purposes of determining whether a subsequent loss mitigation application is duplicative. Dionne v. Fed. Nat’l Mortg. Assoc., No. 15-cv-56-LM, 2016 WL 6892465 *4 (D.N.H. Nov. 21, 2016) (“Chase reviewed the Dionnes’ other applications prior to January 10, 2014. Therefore, consideration of those loan modification applications does not relieve Chase of its obligations to comply with RESPA for the August 2014 application.”); Bennett v. Bank of Am., N.A., No. 8:16-cv-278-T-33TBM, 2016 WL 2610238 *4 (M.D. Fla. May 6, 2016) (citations and internal quotation marks omitted) (“Bank of America was still required to comply with the requirements of section 1024.41 at least once after the section became effective.”); Bennett v. Bank of Am., N.A., 126 F.Supp.3d 871, 884 (E.D. Ky. 2015) (“But section 1024.41 was not effective until 2014, after BANA considered the Bennetts for any loss mitigation options. . . . As such, Rushmore was still required to comply with the requirements of section 1024.41 at least once after the section became effective.”); Searcy v. CitiMortgage, Inc., No. 3:14-cv-02744-P, 2015 WL 11120981 *4 (N.D. Tex. Sept. 16, 2015) (“Plaintiffs’ loss mitigation application submitted before January 10, 2014 did not trigger RESPA and does not bar Plaintiffs’ RESPA claim.”).

If The Servicer Engages In Dual Tracking, The Homeowner Should Move To Stay And Dismiss The Foreclosure Proceedings

Many states require the homeowner to bring any valid foreclosure defenses to the court’s attention via a motion. In Maryland, a homeowner may file a motion asserting such a defense under Md. R. 14-211.

When a homeowner files a motion to stay and dismiss that states, on its face, a valid defense that challenges the right of the lender to foreclose in the pending action, “the court shall set the matter for a hearing on the merits.” Md. R. 14-211(b)(2)(C). The court must enter an order staying any foreclosure sale if the hearing cannot be held before the sale date. Md. R. 14-211(c)(1). To assert the defense of dual tracking in such a motion, the homeowner should allege the date they submitted the complete loan modification application, make it clear that the submission date was 37 days prior to the date of the scheduled sale, explain why the application was complete (to this end, the homeowner should attach a copy of the completed and signed application), and explain why the application was not a duplicative request. As with any complex legal matter, the homeowner should retain a competent lawyer to make certain that the motion is properly drafted and filed.

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