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Can my bank foreclose while doing a loan modification or short sale?Dual Tracking Laws Say No! Real Estate for Santa Clarita Update

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Can my bank still foreclose on me while doing a loan modification or short sale. 

Real-Estate-for-Santa-Clarita--erase-foreclosure-with-new-laws-in-2013--dual-tracking-helps-prevent-foreclosure-while-in-loan-modification-or-short-sale

Real-Estate-for-Santa-Clarita–erase-foreclosure-with-new-laws-in-2013–dual-tracking-helps-prevent-foreclosure-while-in-loan-modification-or-short-sale

Simple answer for most Santa Clarita homeowners is…in most cases, NO! The most recent set of laws known as The California Homeowner Bill Of Rights offer protection to homeowners who are seeking help to modify or short sale their homes, effective Jan 1, 2013. Of course in any law there are guidelines which must be followed in order to be eligible and the “Dual Tracking” laws here are no different. “Dual tracking” is a common practice in which a lender continues to pursue foreclosure even though the homeowner is applying for a mortgage modification or going through the short sale process. While there are the guidelines that must be followed for each the homeowner and bank these new laws are a large positive step to avoid dual tracking for homeowners of Santa Clarita, both current and future. In years past, we have had homeowner clients in Santa Clarita going through a loan modification or a short sale where the servicer  (bank who has the mortgage) foreclosed on them while in the middle of the loan mod, or short sale. Now this practice of dual tracking is illegal in the state of California and will certainly help Santa Clarita home sellers and buyers going forward.

 What is a”foreclosure prevention alternative”?

Foreclosure prevention alternatives can be a loan modification, or short sale or any measure that is proactive in avoiding foreclosure on the home in question through alternative means.  While seeking a short sale or loan modification, the bank cannot foreclose as long as written approval from all parties. This part is very important. Just because you are in the process does not mean they can’t foreclose. You need to have approval from all parties (1st, 2nd…etc.)!

Did your short sale or loan modification bank foreclose on you in the past?

The National Mortgage Settlement   was another success for the Attorney General. If your loan was owned or serviced by any of the settling banks Citibank, JP Morgan Chase/Washington Mutual, Bank of America/Countrywide, Wells Fargo/Wachovia, and Ally Financial. , and your home was foreclosed upon between January 1, 2008 and December 31, 2011, you may be eligible to receive a cash payment as part of the settlement. A settlement administrator has been appointed to accept claims and to oversee the distribution of settlement payments. Information about the settlement administrator is available at www.nationalmortgagesettlement.com.  If you believe you are eligible for a settlement payment but have not received a claim form by the end of October, 2012 please contact the settlement administrator directly. Claim forms must be submitted by no later than January 18, 2013.

 

To sum up the California Homeowner Bill Of Rights (civil code for SB 900 section 2924.11)

A mortgage servicer or lender cannot record a notice of default or notice of sale, or conduct a trustee’s sale, if a foreclosure prevention alternative has been approved in writing by all parties (e.g., first lien investor, junior lienholder, and mortgage insurer as applicable), and proof of funds or financing has been provided to the servicer. This requirement expires on January 1, 2018. Effective January 1, 2018, a lender or mortgage servicer cannot record a notice of sale or conduct a trustee’s sale if the borrower’s complete application for a foreclosure prevention alternative is pending, and until the borrower has been given a written determination by the mortgage servicer. Smaller banks are only covered by the requirements taking effect in 2018. CC 2924.11

 

Civil Code, to read: 2924.11.

 

        (a) If a foreclosure prevention alternative is approved in writing to the recordation of a notice of default, a

mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default under either of the following circumstances:

(1) The borrower is in compliance with the terms of a written trial or permanent loan modification, forbearance, or repayment plan.

(2) A foreclosure prevention alternative has been approved in writing by all parties, including, for example, the first lien investor, junior lienholder, and mortgage insurer, as applicable, and proof of funds or financing has been provided to the servicer.

  (b) If a foreclosure prevention alternative is approved in writing after the recordation of a notice of default, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of sale or conduct a trustee’s sale under either of the following circumstances:

(1) The borrower is in compliance with the terms of a written trial or permanent loan modification, forbearance, or

repayment plan.

(2) A foreclosure prevention alternative has been approved in writing by all parties, including, for example, the first lien investor, junior lienholder, and mortgage insurer, as applicable, and proof of funds or financing has been provided to the servicer.

  (c) When a borrower accepts an offered first lien loan modification or other foreclosure prevention alternative, the mortgage servicer shall provide the borrower with a copy of the fully executed loan modification agreement or agreement evidencing the foreclosure prevention alternative following receipt of the executed copy from the borrower.

  (d) A mortgagee, beneficiary, or authorized agent shall record a rescission of a notice of default or cancel a pending trustee’s sale,if applicable, upon the borrower executing a permanent foreclosure prevention alternative. In the case of a short sale, the rescission or cancellation of the pending trustee’s sale shall occur when the short sale has been approved by all parties and proof of funds or financing has been provided to the mortgagee, beneficiary, or authorized agent.

 (e) The mortgage servicer shall not charge any application, processing, or other fee for a first lien loan modification or other foreclosure prevention alternative.

 (f) The mortgage servicer shall not collect any late fees for periods during which a complete first lien loan modification application is under consideration or a denial is being appealed, the borrower is making timely modification payments, or a foreclosure prevention alternative is being evaluated or exercised.

(g) If a borrower has been approved in writing for a first lien loan modification or other foreclosure prevention alternative, and the servicing of that borrower’s loan is transferred or sold to another mortgage servicer, the subsequent mortgage servicer shall continue to honor any previously approved first lien loan modification or other foreclosure prevention alternative, in accordance with the provisions of the act that added this section.

 (h) This section shall apply only to mortgages or deeds of trust described in Section 2924.15.

  (i) This section shall not apply to entities described in subdivision (b) of Section 2924.18.

  (j)  This section shall remain in effect only until January 1, 2018, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date.

For help with foreclosure prevention guidance please contact us immediately as time is of the essence when in the foreclosure process or beginning phases.

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