4.2 Dual Tracking Prohibition & Single Point of Contact (SPOC)

4.2 Dual Tracking Prohibition & Single Point of Contact (SPOC)

Exam Key Point: Dual tracking—recording foreclosure notices or conducting a trustee sale while a complete loan modification application is under review—is illegal in California under Civil Code § 2923.6. Large servicers must also assign a dedicated Single Point of Contact (SPOC) under Civil Code § 2923.7 to streamline communication and prevent administrative oversights.

The Dual Tracking Prohibition (Civil Code § 2923.6)

Historically, one of the most devastating practices in mortgage servicing was dual tracking. Dual tracking occurred when a mortgage servicer invited a delinquent homeowner to apply for a loan modification while simultaneously pushing forward with non-judicial foreclosure proceedings. Homeowners frequently submitted complete financial packages, only to have their homes sold at a trustee sale because the foreclosure department operated independently of the loss mitigation department.

To eradicate this practice, California Civil Code § 2923.6 strictly prohibits mortgage servicers from advancing the foreclosure process while a complete first-lien loan modification application is pending.

Statutory Triggers and Servicer Restrictions

When a borrower submits a complete application for a first-lien loan modification (or loss mitigation option) to a large servicer:

1. Prohibition on NOD Recording: The servicer cannot record a Notice of Default (NOD).
2. Prohibition on NTS Recording: If an NOD was already recorded, the servicer cannot record a Notice of Trustee's Sale (NTS).
3. Prohibition on Trustee Sale: If an NTS was already recorded, the servicer cannot conduct a trustee sale or finalize the transfer of title.

What constitutes a "complete application"? Under Civil Code § 2923.6(h), an application is deemed "complete" when the borrower has submitted all requested documentation and information within the servicer's reasonable deadlines. If a servicer requires additional documents, it must promptly notify the borrower in writing and provide a reasonable timeframe to submit the missing items.

Written Denial Notice & Mandatory 30-Day Appeal Window

If a servicer evaluates a complete first-lien loan modification application and decides to deny the request, foreclosure proceedings cannot resume immediately. Civil Code § 2923.6 imposes mandatory post-denial procedural protections:

1. Formal Written Denial Notice

The servicer must issue a formal written denial letter to the borrower detailing:

• The specific reason(s) for the denial (e.g., net present value calculation failure, insufficient income, owner-occupancy default);
• The specific monthly gross income and expense figures used in the servicer's evaluation;
• The deadline for the borrower to submit an appeal; and
• Information on how to appeal the decision or submit alternative loss mitigation documentation.

2. Mandatory 30-Day Appeal Period

The borrower has 30 calendar days from the date of the written denial notice to file an appeal. During this 30-day appeal window:

• The servicer cannot record an NOD or NTS, nor hold a trustee sale.
• If the borrower files a timely appeal, the foreclosure ban remains in effect until 15 calendar days after the servicer issues a final written decision denying the appeal.

Single Point of Contact (SPOC) Requirements (Civil Code § 2923.7)

Another common failure in mortgage servicing was the "customer service carousel," where delinquent borrowers were forced to re-explain their financial distress to different call center representatives every time they contacted their servicer.

To solve this, California Civil Code § 2923.7 mandates that upon request by a borrower who requests a foreclosure prevention alternative, a large mortgage servicer must promptly assign a Single Point of Contact (SPOC).

Key SPOC Statutory Responsibilities

The assigned SPOC may be an individual or a dedicated team of personnel. The SPOC must:

1. Communicate Loss Mitigation Options: Explain the application process, required documentation, and available foreclosure prevention options.
2. Coordinate Application Documents: Timely collect and process all submitted financial documents and inform the borrower of missing items.
3. Provide Status Updates: Inform the borrower of the current status of their loss mitigation application and servicer decisions.
4. Access Decision-Makers: Have direct access to individuals who possess the authority to make binding loss mitigation decisions.
5. Remain Assigned: Remain assigned as the borrower's SPOC until the loss mitigation process is finalized or the borrower's account is brought current.

Statutory Remedies and Private Right of Action (Civil Code § 2924.12)

HBOR is not an empty mandate; it grants borrowers powerful judicial enforcement tools against non-compliant mortgage servicers under California Civil Code § 2924.12.

If a servicer commits a material violation of § 2923.55 (pre-foreclosure contact), § 2923.6 (dual tracking), § 2923.7 (SPOC), or § 2924.17 (robosigning), the borrower has a statutory private right of action in California Superior Court:

1. Pre-Sale Remedy: Injunctive Relief

If the trustee's deed upon sale has not yet been recorded, a court may grant an injunction to halt the foreclosure sale until the servicer cures the material violation. Once the servicer demonstrates full statutory compliance, the injunction is dissolved.

2. Post-Sale Remedy: Monetary Damages

If a trustee sale has already occurred and the trustee's deed upon sale has been recorded:

• The servicer or lender is liable for actual economic damages suffered by the borrower.
• If the court finds that the violation was willful, intentional, or reckless, the court may award statutory damages of three times actual damages (treble damages) OR $50,000 statutory damages per violation, whichever is greater.
• A prevailing borrower is also entitled to reasonable attorney's fees and court costs under § 2924.12(i).