Following a bank’s refusal to enroll their client into a government loan service in Delaware, she decided to sue. The client, a working single mother, had asked her employer for an advance payment due to financial hardship, believing she would soon be enrolled in the loan program through her bank. For the employer to give her hardship funds, however, it required a letter from the bank, which was requested multiple times without ever being sent. Additionally, some of the bank’s employees told the woman that she would soon be in the loan program, while others instituted foreclosure on her home and personal assets. The woman never received any reinstatement letter from the bank, and the ensuing lawsuit over loan benefits necessitated an expert in banking, specifically in dual tracking of foreclosing and pursuing business with a client simultaneously, the use of cash pooling, and service agreements.
Question(s) For Expert Witness
- 2. Do you have knowledge of 'dual tracking?'
- 3. What is your experience with and understanding of pooling and service agreements?
Expert Witness Response E-009408
To understand whether there was dual tracking in this case is first and foremost a question of timing. Negotiating business while still foreclosing on a client was not illegal throughout the United States until the Dodd-Frank Act restricted it as of January 2014, though there are requirements the bank will have to have met if this case occurred before then. However, before January 2014 only a handful of states had laws prohibiting dual tracking, so this may be unlikely. Having worked in investment banking and with rating agencies I am familiar with securitizations, and assume that in this case the plaintiff mortgage was “pooled” with other mortgages and securitized or held by an investor in a pool. With these agreements, it is important to note that the servicer is not frequently the party which holds the mortgages.
Expert Witness Response E-013958
As VP of Investments at a capital management firm, I completed deep due diligence of the US mortgage servicing industry as my firm considered buying portfolios of under-performing mortgage loans and investing in third-party servicing organizations. In my recent role as Managing Director at another private firm, I was provided the opportunity to examine these assets again and various third-party servicing groups as part of an overall wealth building strategy for several high net-worth individuals.
It appears that the loan servicing group was acting independently from either the bank’s government loan or origination groups. It’s also entirely possible that the servicing group could have been outsourced to an independent third-party whose role is governed by the Public Securities Association and is not part of the government loan process – thus the creation of “dual-tracking.” Thus while the bank, as the client-facing originator of the loan, was attempting to provide service to its customers, it did in fact, not own or service the loans in question. In this case, the details are important. Correspondence between the client, the originating bank, and the servicing agent are essential to prove liability of the bank or servicing group. This will have to be weighed against the state law at the time regarding the usage of “dual-tracking” as a method for lenders to attain proper security on their collateral.