Some consumer groups and attorneys general believed that "dual tracking" was outlawed under last year's $25 billion national foreclosure settlement -- meaning servicers could not foreclose on delinquent borrowers who were in the midst of pursuing a loan workout. However, a new review of the pact has found that dual tracking is still legal, sending AGs and the official settlement monitor into a rush to revise the terms. Last week, settlement monitor Joseph A. Smith said that he wants servicers to halt dual tracking once a borrower files initial paperwork for a modification. Many authorities believed that to be the case already; but in reality, the five servicers participating in the settlement -- Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial -- negotiated that they would only stop a foreclosure once a borrower had turned in a "complete" modification application. In the confusion, it is uncertain how many borrowers have ended up in foreclosure because of the ongoing use of dual tracking amidst regulators' claims that the process had been banned. Smith is negotiating to add new tests to set minimum requirements for loan modifications. Iowa AG Tom Miller is also negotiating with the banks to determine the minimum documents necessary for an application to be complete to halt the foreclosure process.
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