A California teacher is suing Fay Servicing for $25 million over dual tracking, claiming foreclosure actions were taken while his relief application was pending.
On October 7, 2026, Matthew Del Real, a public school teacher from California, initiated a federal lawsuit against Fay Servicing, coinciding with the date scheduled for a foreclosure on his family home. The case, filed in the US District Court for the Eastern District of California, names multiple defendants including Fay Servicing LLC and Citigroup Mortgage Loan Trust 2023-A, with Del Real seeking $25 million in compensatory damages, punitive damages, and a jury trial.
The crux of Del Real’s allegations lies in the practice known as dual tracking, wherein a mortgage servicer pursues foreclosure even while a borrower’s request for relief is still under review. This practice is specifically prohibited under federal rules set by Regulation X.
Del Real’s journey began when he purchased his home in Chico, California, in July 2011, enjoying a stable relationship with his original loan servicer, Wells Fargo Home Mortgage, for over a decade. However, after encountering financial difficulties in mid-2023, he entered a six-month forbearance agreement with Wells Fargo that paused his mortgage payments.
A Stark Transition
Things took a turn when Fay Servicing took over his loan. On December 11, 2023, he received a welcome letter from Fay Servicing, promptly followed by a notice regarding his delinquent payments and the possibility of foreclosure. The suit alleges that within the same correspondence, Fay Servicing identified itself as a debt collector for Citigroup Mortgage Loan Trust 2023-A, claiming $15,151.08 was due.
By May 2024, Fay Servicing escalated the situation by sending a "Notice of Default and Intent to Accelerate," demanding $22,994.67 to remedy the default. In an attempt to assist, Del Real's parents made two payments of $2,643.42 each in May and June 2024, which the servicer subsequently rejected, citing insufficient funds for outstanding balances. When Del Real inquired, he was told that partial payments would not be accepted.
Repeated Application Struggles
Del Real initially applied for loss mitigation in June 2024, but his efforts were met with repeated claims from Fay Servicing that his applications lacked necessary information—allegations he robustly disputes, asserting he consistently submitted thorough applications. The lawsuit cites these repeated rejections as a "predatory practice." Additionally, Del Real notes that multiple account managers were assigned to his file, contravening the requirement for a dedicated point of contact as outlined in California’s Homeowner Bill of Rights.
As the financial stakes continued to grow, a payoff statement from September 2025 indicated that the total loan payoff had climbed to $443,852.69. By September 2026, the amount needed to stop the impending sale had skyrocketed to $113,823.63.
Contradictory Communication
This situation highlights the dual tracking issue most starkly. Fay Servicing communicated to Del Real in September 2026 that, despite his mortgage being delinquent and a foreclosure sale set for October 7, the servicer encouraged him to submit an updated loss mitigation application. Del Real complied, submitting all required documentation, yet shortly thereafter, Fay Servicing sent him another letter stating his application remained incomplete and sought additional information, diluting any certainty regarding his application status.
Even though he submitted the requested forms promptly, the scheduled sale remained intact, prompting Del Real to file his lawsuit on the very day of the foreclosure.
A Servicer Under Scrutiny
The lawsuit sheds light on Fay Servicing's regulatory history, referencing a CFPB order from June 2017 that sanctioned the servicer for "illegal and predatory mortgage practices." Furthermore, an August 2024 CFPB order reportedly found that Fay breached existing regulations, including violations of the 2017 order and multiple consumer protection laws.
Claims and Implications
Del Real's lawsuit encompasses six allegations, including racial discrimination, wrongful foreclosure, dual tracking violations, and various regulatory breaches under both federal and state laws. The racial discrimination claim suggests a racially hostile interaction between the servicer and Del Real, noted as a First Generation Mexican American.
For industry players, including compliance teams and loss mitigation departments, Del Real's case underscores the heightened risk associated with dual tracking, particularly when servicers encourage borrowers to apply for relief just weeks before a foreclosure. The allegations presented in the lawsuit remain untested in court, leaving the future of these claims uncertain.
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