Dual Tracking

What is Dual Tracking?


Dual tracking
typically refers to when a mortgage lender moves forward with the foreclosure process despite simultaneously negotiating with homeowners for a potential loan modification. The term gained popularity shortly after the burst of the U.S. housing market bubble in the early 2000s and subsequent foreclosure crisis.

Prior to the National Mortgage Settlement, several of the nation’s largest mortgage servicers regularly practiced dual tracking since there were not many state or federal laws explicitly prohibiting this sort of behavior. Mortgage servicers would assure distressed homeowners they were great candidates for loan modifications, only to rip the rug out from under them with a foreclosure sale or trustee sale.

Luckily for homeowners, the deceptive practice has come under fire and there are recent laws restricting dual tracking.

Dual Tracking Laws

Dual tracking laws appeared to be few and far between prior to the National Mortgage Settlement. The Dodd-Frank Wall Street Reform and Consumer Protection Act was one of the first pieces of legislation addressing the issue.

Dodd–Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into federal law by the Obama Administration in 2010, was one of the first laws tackling the problem of dual tracking. Under its provisions, mortgage servicers are forbidden to initiate the foreclosure process if a loan modification application is being reviewed.

In the event that a homeowner submitted a loss mitigation application after the foreclosure has been initiated but more than 37 days before a sale date has been scheduled, the servicer is required to halt the foreclosure until:

  • The mortgage servicer notifies the homeowner he or she is ineligible for any loss mitigation option
  • The homeowner refuses the workout option offered by the mortgage servicer
  • The homeowner accepted the workout option but failed to follow the terms of the agreement

The National Mortgage Settlement

The National Mortgage Settlement was a landmark settlement reached between the federal government and five of the nation’s largest banks. The settlement included $26 billion in relief for distressed homeowners, and 305 new mortgage servicing standards the five major banks are required to comply with.

The National Mortgage Settlement and the Dodd-Frank Wall Street Reform and Consumer Protection Act are similar in regards to their prevention of dual tracking. The mortgage servicer cannot move forward with a foreclosure sale while an application for a loan modification is pending if the application was sent more than 37 days prior to the sale date.

Additionally, if the homeowner is approved for a loan modification after submitting a loss mitigation application within 15 days of the scheduled foreclosure sale, then the servicer may not foreclosure unless the homeowner fails to follow the terms of the trial modification agreement.