This scenario is actually much more common than you think it is. It’s illegal, in California at least, for lenders to do this. It’s called dual tracking and in 2013, the legislature here in California passed what’s known as the Homeowner’s Bill of Rights that made dual tracking illegal in this exact scenario. In fact, this scenario was so common and there was so much public outcry about lenders doing this, they actually passed a law about it and made it illegal for lenders to be negotiating with you and working with you on one hand, on a loan modification while at the same time, taking steps towards foreclosing on your property. If this has happened to you, you can sue your lender. Absolutely.
They are not allowed to be in an ongoing loan modification review with you and also take steps towards foreclosure and certainly not actually foreclose. Even if they file a notice of default or notice of sale during the loan modification process, that right there is unlawful and if they sold your property, that’s the worst of the worst and you can definitely sue them. Two good things can happen to you if that is your situation. 1) The lender may have to reverse the sale. So if the lender bought the property themselves through one of their own affiliates meaning no one came and bid on the property, they could fairly easily reverse the sale, revert the property back to you as the homeowner again and never transfer title. That’s one good way it could get resolved.
The other way that it could get resolved which isn’t really that ideal but can still be good is for the lender to have to pay you damages and there’s not only statutory damages but there’s also penalty type damages for lenders doing this. The legislature really didn’t want lenders foreclosing on properties while they were also negotiating with borrowers on a loan modification. If this situation sounds familiar and you feel that your home was foreclosed on while you were negotiating with the lender in a loan modification scenario, you should definitely speak to a foreclosure defense attorney, a real estate litigator and there is probably something that you can do and you may be able to recover a pretty substantial amount of money for this type of wrongdoing on the part of your lender.
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