Regarding dual tracking, Adams says that before the rules changed "some investors required the foreclosure proceeding to continue during the modification negotiation."

Adams adds that Wells Fargo Home Mortgage has "made a commitment to avoid referring a loan to foreclosure or to advance an existing foreclosure process" if the bank has received a complete modification package from the borrower, unless the modification has been denied and a 20-day appeal process has concluded. The foreclosure process also stops if the borrower has been approved for a modification or forbearance plan and is complying with the new terms, or if a short sale or a deed-in-lieu of foreclosure has been approved by all parties, with financing provided.

The new California laws will become effective in January, setting up conflicts with the national mortgage settlement, which itself conflicts in some ways with the OCC's order, as well as possible conflicts with new national mortgage loan servicing rules expected to be handed down by the Consumer Financial Protection Bureau late this year or early in 2013.

Frank Mayer -- a partner in the Financial Services Practice Group of Pepper Hamilton LLP, in the firm's Philadelphia office -- says that rather than focusing on the mechanics of the foreclosure process, "it would be nice to see the policy makers focus on how to deal with the negative equity issue, because there are rational decisions being made by homeowners" who decide whether or not to walk away from homes with mortgage loan balances greatly exceeding their market value.

Mayer worries "about unintended consequences," because in California non-judicial foreclosures are quite common, but the new laws -- which include serious penalties for violations of the rules requiring a single point of contact for the borrower facing foreclosure and the rules preventing "dual tracking -- could lead to an increase in more expensive judicial foreclosures.

In California, the property title remains in trust until the mortgage loan is fully paid off. During a non-judicial foreclosure, the trustee can sell the property, greatly facilitating the process for the lender or the holder of the mortgage, and "they just write off the deficiency," according to Mayer.

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