In a recent California case, the judge ruled in favor of homeowners saying it is illegal to foreclose while a short sale is being negotiated. The Court opined: Most dual tracking claims involve a borrower’s application for a loan modification and CC 2923.6.
Dual tracking is also prohibited, however, if a borrower and servicer agree to a non-modification foreclosure alternative, like a short sale.
If a short sale agreement is in writing, and if the borrower submits proof of financing to the servicer, a servicer may not move forward with the foreclosure process. CC § 2924.11(a)-(b). Here, servicer was still reviewing borrower’s short sale application, but had already received proof of financing when it foreclosed.
Even without evidence of a final, approved, short sale agreement, the court found borrowers to have stated a viable dual tracking claim under CC 2924.11 and overruled servicer’s demurrer.