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Loan Modification Articles

Mortgage Servicer Violations in Loan Modifications

ByJoshua Denbeaux October 6, 2022April 3, 2025

Mistakes by mortgage servicers in loan modifications are more common than you might think. If a mortgage servicer makes a mistake during the loan modification process, you could be unrightfully not given a loan modification, leading to a wrongful foreclosure. 

Depending on your situation, a loan modification might be a good option if you are facing foreclosure and need help with monthly mortgage payments. It’s important that you understand mortgage servicer loan modification rules and regulations when pursuing a modification. 

If you think your servicer made a mistake on your loan modification, you should speak with a loan modification attorney as soon as possible. Schedule a free consultation with Joshua Denbeaux today to learn more about what options you have as a homeowner should your rights be violated.

What Is a Loan Modification?

A loan modification is a change to the original loan that you owe to your lender. Loan modifications can involve changes such as reducing the interest rate, splitting the payments into smaller amounts, or extending the loan to reduce payment amounts. 

In most situations, it’s better to apply for a mortgage loan modification sooner rather than later, as it will likely set you up to be in a better position to delay or stop foreclosure. A few situations in which you might consider pursuing a loan modification are if you are struggling to stay up-to-date on your mortgage payments, have received a Notice of Intent to foreclose on your home, or are facing an imminent default judgment.

Common Mortgage Servicer Violations in Loan Modifications

Mistakes by mortgage servicers are relatively common in the loan modification process. These mistakes may violate homeowner rights, and it’s important to be aware of the mistakes servicers make so you can identify them in the future. Loan modification federal laws may penalize the mortgage servicer for loan modification violations, which can sometimes lead to the property being forfeited back to the homeowner. 

Here are some common examples of mortgage servicer violations made during the loan modification process:

1. Not Reviewing the Application in a Timely Manner

Mortgage servicers must follow specific timelines to comply with federal mortgage servicing laws. When a mortgage servicer receives a loan modification application 45 or more days before a foreclosure sale, the servicer must review the application and notify the mortgagor if the application is complete or incomplete within five days. If the loan modification application is received more than 37 days before a foreclosure sale, the mortgage servicer must review the application and determine if the borrower qualifies for a loan modification within 30 days. 

Missing important dates for a mortgage modification is a common mistake that mortgage servicers make. It’s important that you keep track of these dates so you’re aware if your application has been under review for too long. 

2. Dual Tracking

Dual tracking is when a mortgage servicer continues to move forward with the foreclosure on your home while considering or processing your application for a loan modification or another method of avoiding foreclosure. 

The Consumer Protection Act of 2010 and New Jersey loan modification laws prohibit dual tracking. If you have received a loan modification or are being considered for one, your servicer cannot file for foreclosure. Doing so is a violation of home loan modification laws. 

3. Asking Homeowners to Resubmit Documents

When submitting documents for a mortgage loan modification, the information stays relevant for 90 days after submission. Mortgage servicers frequently request updated documents for relevance before this time period has elapsed. If you are within 90 days of your original submission, you should not need to resubmit documents. 

It’s important to keep a record of what documents have been submitted and when they were submitted. If possible, sending documents through a trackable service is another way you could maintain personal records of when documents were submitted.

4. Not Honoring a Modification Agreement After a Servicer Transfer

If your mortgage is through a large mortgage lender, your mortgage servicer will likely change at some point in your loan term. However, a change in your mortgage servicer should not have any impact on the loan modification or impact where you are in the process of receiving a loan modification. 

When transferring servicers, it is possible that your new servicer might fail to review an already submitted loan modification application or might fail to honor an agreement that was made with your previous servicer. Both of these violate loan modification rules and regulations.

Changing your mortgage servicer does not impact the timeline that the mortgage lender has to review and notify you about your mortgage loan modification application. Additionally, an agreement made with a previous servicer is still an agreement made by a lender that should be honored.

5. Telling Homeowners They Must Be in Default

A servicer may tell you that in order to qualify for a mortgage loan modification, you have to already be in default on your mortgage. Being in default on your mortgage means you have failed to follow the terms of your mortgage. 

You may be eligible for a loan modification whether you are already in default or are in danger of falling behind on your payments. This means that you don’t have to be in default to qualify for a modification with your servicer.

6. Miscalculations

In reviewing your application, a servicer considers the loan’s principal balance, the property’s value, and the homeowner’s income. If a miscalculation is made with any of this information, it is possible that a servicer could deny a loan modification, even if the homeowner qualifies for one. 

Loan modification federal law requires that if a loan modification is denied based on a calculation, the servicer provides the information used in the calculation in the denial notice. If you believe you are qualified for a loan modification that you have not been given, you may have been the victim of a miscalculation. 

7. Failing to Convert a Trial Modification to a Permanent Modification

Many mortgage modifications will begin with a trial modification, typically lasting three months. If the payments for the trial modification are all made on time, then the modification should become permanent. If your trial modification does not become a permanent modification at the end of your trial period, you should address that with your servicer as soon as possible.

If you think your loan modification may have been subject to any of these violations, you should consider contacting a loan modification attorney. An experienced lawyer may be able to assess your particular situation and identify violations you missed, which can often happen for homeowners who are unfamiliar with the rules and regulations associated with the loan modification process.

Talk to a Trusted Loan Modification Attorney

You can try to go through the process of managing a loan modification violation on your own. Still, it can be a long and difficult process, especially for someone who doesn’t know the details of home loan laws. An attorney may be able to help you navigate your particular situation and make the process much easier for you. 

Joshua Denbeaux is a loan modification attorney who has over ten years of experience with loan modification violations. He has helped clients through the loan modification process by negotiating with the mortgage servicer, keeping track of important documents, and advocating on behalf of his client’s best interests.

Contact us today to schedule a free consultation and find out how Josh may be able to help identify loan modification violations and save your home from foreclosure.

Joshua Denbeaux

Attorney

Joshua Denbeaux is a Partner at Denbeaux & Denbeaux, concentrating his practice on financial consumer rights issues and foreclosure defense. He has substantial experience in legal matters related to foreclosure, loan modification, debt collection, and the prosecution of cases related to predatory lending. Mr. Denbeaux received his law degree in 1994 from Seton Hall University after completing his undergraduate work at The College of Wooster. Mr. Denbeaux is licensed to practice in the United States District Courts for New Jersey.

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