A recent survey of consumer attorneys in 45 states reported that they believe thousands of homeowners were improperly foreclosed on within the last year while awaiting loan modifications or due to improper payment processing.
Salvadore Rodriguez of New Haven is caught in a housing crisis. A divorce and bankruptcy filing left him behind on his mortgage payments. He said in the middle of modifying his home loan, his lender, US Bank, foreclosed on his house.( Wed Apr 25 16:02:52 PDT 2012 $__output )
"Even though I explained to them that the finances and everything, you got everything you needed," Rodriguez said. "You know I can pay the mortgage."
But it was too late. The father of two is still living in the house, but he's facing eviction. A recent court order is allowing Rodriguez to remain in the house until the end of June.
US Bank said Rodriguez had a Federal Housing Administration loan that required the bank to file a foreclosure notice within six months of a borrower's default.
Still, foreclosure prevention attorneys say what happened to Rodriguez is called dual tracking. Its impact can be very difficult, even impossible to reverse.
"It is unfortunately a common problem nationwide," said attorney Pamela Heller of the Connecticut Fair Housing Center. "The homeowner thinks that because they're working something out, they don't need to do anything about the judicial case and then that case moves forward and the homeowner actually loses title to the home."
Heller said she believes in most cases it's a question of one hand not knowing what the other hand is doing.
Some homeowners on the verge of foreclosure are getting help. Connecticut is party to a recent multi-state settlement against lenders to stop dual tracking.
"They have to foreclose or modify the loan and before they can decide to go to foreclosure they have to try all reasonable methods of modifying the loan," said Connecticut Banking Commissioner Howard F. Pitkin.
However, the order only applies to the nation's five largest banks. US Bank is not included. US Bank did not directly answer our question when asked if it would pursue dual tracking in the future, but a spokesperson said foreclosure is always their last option and that they have modified thousands of mortgages in order to keep borrowers in their homes.
A spokesperson for Connecticut's Attorney General said there is another settlement in the works that would prohibit dual tracking at the nation's next nine largest banks