Important New Rights Under the Foreclosure Reduction Act

California Civil Code §2923.5 (§ 4) and §2924.18 – Dual Tracking:

Dual tracking is when the Loan Servicer assures you that you are being considered for a loan modification while simultaneously (sometimes secretly) foreclosing according to the California foreclosure statutes by recording a NOTICE OF DEFAULT (“NOD”) and a NOTICE OF TRUSTEE’S SALE (“NOS”) and then holding a sale.  Loan Servicers argue that they have no duty to modify a loan, and have used this “lack of duty” argument to win in court against borrowers that were successfully distracted by dual tracking.  The new statute requires the servicer to stop all foreclosure actions while you are in active review for modification and to notify you in writing when the review is over and give you an opportunity to appeal.  CCC §2923.5 (§4) states in relevant part:

“A mortgage servicer is prohibited from commencing or continuing the foreclosure process (i.e. recording a NOD or NOS, or conducting a trustee’s sale) pending a completed review of a loan modification application submitted by a borrower and until after the borrower has been provided with a written decision about eligibility for a loan modification.”

California Civil Code §2923.7 – Single Point of Contact

To comply with the old statutory scheme Loan Servicers provide 800 numbers for borrowers to apply for a modification while at the same time they affect corporate policies that render these numbers worthless.  Borrowers that call these 800 numbers to reach call centers in foreign countries where they are transferred, disconnected, or locked out of the phone system and where they are directed to a different anonymous voice each time they call.  Borrowers are forced to fax and refax, send and resend personal documents again and again that are repeatedly lost and to speak to different people that never seem to know what went on before or how things got lost.  If a borrower is lucky enough to find someone accountable, someone, with human empathy, that person disappears, their number disconnected, their existence wiped out as they are replaced with another agent that is less humane. 

The requirement for a single point of contact means that borrowers will not have to start again each time they call the Loan Servicer and will have one person (or a team of people) assigned to keep track of them and their documents. 

CCC §2923.7 states in relevant part:

“A mortgage servicer is required to create a ‘single point of contact’ upon the request of a borrower. The single point of contact may be an individual or a team that has the authority to perform specific responsibilities, has knowledge of a borrower’s situation and current status provides accurate information to a borrower, and coordinates all documents associated with a borrower’s foreclosure prevention alternative.”

California Civil Code §2924.10 – Loan Modification Review Process

Before 2013 there were no statutory requirements for a Loan Servicer to Notify a Borrower 1) when their loan modification application was received, 2) the time frame for consideration, or 3) an answer in writing.  This led to the current state of affairs whereby borrowers are forced to call the same 800 number to be repeatedly told they are “under review” or “in-process” until one day they were told the “review” was over and they were “denied.”  Plaintiffs were “denied” at the Loan Servicer’s discretion and were not notified except by a NOTICE OF TRUSTEE’S SALE (NOS) that was recorded with the county recorder. 

The Foreclosure Reduction Act of 2012 requires Loan Servicers to provide 1) written acknowledgment of receipt of a loan modification application, 2) a schedule for consideration, and 3) a denial (or approval) in writing. 

CCC §2924.10 states in relevant part: 

“A mortgage servicer is required to provide a borrower written acknowledgment of receipt within five business days of receiving a completed loan modification application or any documents connected to a loan modification application. The initially written acknowledgment of receipt of the loan modification application must include a description of the loan modification process, including an estimate of when a decision will be made and length of time a borrower will have to consider an offer; any deadlines or expiration dates for submitting documents; and any deficiencies in the application.”

California Civil Code §2923.6 – The Right to Appeal

Prior to January 1, 2013, there was no statutory right to appeal a denial of a loan modification by a Loan Servicer.  The Lenders operated for their own self-interest back when they loaned you more than you could afford in order to defraud investors of REITS, now, as Loan Servicers, they seek to make as much money as possible from your default and foreclosure with the same lack of concern for those same investor that they are now “servicing” for.  Now Loan Servicers will not be permitted to deny a loan modification without explanation.

Beginning this year Loan Servicers must provide you with denial in writing including the reasons for denial and information about the appeal. The borrower will then have thirty (30) days to appeal the denial and show that the Loan Servicer was in error. California Civil Code §2923.6 (§7) states in relevant part:

“If a loan modification application is denied, a mortgage servicer is required to send a borrower written notice identifying the reasons for denial, including (1) timing and instructions for requesting an appeal; (2) if applicable, reasons for investor disallowance of the loan modification; (3) information related to the net present value calculation, if the denial was based on this calculation; (4) if applicable, a finding of a prior failed loan modification; and (5) a description of other foreclosure prevention alternatives for which the borrower may be eligible. A mortgage servicer must provide a borrower at least 30 days from the date of a written denial to appeal the denial and provide evidence that the mortgage servicer’s determination was in error.”

If you are out of options and can’t get a loan modification, there are still ways to stop your foreclosure sale and hold onto your house.


Susan M. Murphy is a litigating attorney that sues the banks on behalf of homeowners, both in individual and mass-joinder cases.


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