Category Archives: Debt Collection

California Eliminates Dual Tracking in Foreclosure Actions

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Throughout the foreclosure crisis, California lenders have been free to employ a practice known as “dual tracking.”  This practice has allowed mortgage lenders to forge ahead with foreclosure actions, including property sale, irregardless of whether they were simultanously engaged in loan modification discussions with borrowers.  In fact, “dual tracking” is a practice that many mortgage investors have long required lenders to pursue in order to expedite the foreclosure process to the extent possible.

The practice of dual tracking has presented serious problems for borrowers facing the prospect of home foreclosure.  Many borrowers have been lulled into an illusory sense of security thinking that they were protected from foreclosure while engaged in good faith loan modification negotiations with lenders, only to be blindsided by a foreclosure sale in the midst of this process.

Additionally, communication channels between lenders and borrowers have frequently become muddled as simultaneous actions were being taken by different lending departments, making it very difficult for a borrower to obtain a clear picture of the status of his or her loan at any given point in time.

To address the serious problems created by dual tracking, California has now made this practice illegal.  On October 3, 2012, a negotiated settlement took effect that bars this practice by five of California’s largest mortgage lenders including Bank of America, Citi, JP Morgan Chase, Wells Fargo, and Ally.  On January 1, 2013, California’s prohibition of dual tracking, the first such law in the United States, becomes applicable to all mortgage lenders.

Beginning in January, homeowners will have a right to sue lenders who continue to engage in the practice of dual tracking.  Under this law known as The Homeowner Bill of Rights, banks found to have violated the law may be forced to pay attorneys’ fees incurred by the borrower.  In addition, lenders may be hit with statutory civil damages of up to $50,000 per violation.  Perhaps most importantly, borrowers will be able to obtain an injunction halting foreclosure proceedings if able to demonstrate a willful, intentional, or reckless violation of the law.

If you are a California homeowner that has been subject to the practice of dual tracking, you are urged to contact a Forclosure Lawyer at The Pivtorak Law Firm by calling (415) 484-3009, or click here to request a free, confidential consultation online.

Wells Fargo Loan Modification Class Action

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The Pivtorak Law Firm, as lead co-counsel, has filed a class action lawsuit against Wells Fargo as a result of an allegedly deceptive forbearance-to-loan modification program.  This action was commenced in the federal district court for the Northern District of California on April 19, 2010.

The lawsuit alleges that Wells Fargo deceitfully attempted to collect payments from defaulted California residential mortgage borrowers by sending them a letter evidently promising to stop foreclosure proceedings and to approve them for a loan modification if they showed that they could make three monthly trial plan payments.  In reality, however, the letter promised nothing and most borrowers who made all three payments according to the agreement were not offered a loan modification but were subsequently foreclosed on by Wells Fargo, the suit says.  Plaintiffs allege that this program was initiated by Wells Fargo in order to circumvent the protections of California’s anti-deficiency laws, which prevent banks for pursuing homeowners’ personal money or property after a foreclosure sale.

The form letter sent to borrowers by Wells Fargo said that the bank had “good news.”  The letter also said that, according to financial information provided by the homeowner, they were qualified for a trial program showing they can make regular payments.  The suit alleges that the letter also contained other language that easily led borrowers to believe that their long and difficult struggle to make their mortgage payments was over.  Unfortunately, according to the lawsuit, their nightmare was just beginning.

Plaintiffs argue that instead of offering a three-month trial plan that is supposed to convert into a loan modification like the government’s Home Affordable Modification Program (“HAMP”), Wells Fargo intentionally gave borrowers the wrong impression that they were being offered such a program.  Instead, the suit says, Wells Fargo collected as many payments as it could from California residential borrowers before foreclosing on their homes.

On Jan. 3, 2011, Judge Joseph C. Spero ruled against Wells Fargo in its motion to dismiss Plaintiffs’ Rosenthal Fair Debt Collection Act and unfair competition law claims.  This ruling means that Plaintiffs have standing to pursue statutory damages against Wells Fargo for its unfair debt collection practices and restitution for payments borrowers made as a result of the bank’s collection letter as well as injunctive and declaratory relief, pending class certification.

UPDATES:

February 22, 2011 – Managing Partner, Steve Berman, and his colleague Tom Loeser of the law firm of Hagens Berman Sobol Shapiro, LLP, associated into the case and will serve as co-lead counsel, representing homeowners in the case against Wells Fargo.