Many consumer groups and even some attorneys general thought last year's $25 billion national mortgage settlement between the top five mortgage servicers and 49 states prohibited servicers from foreclosing on delinquent borrowers who were also pursuing loan modifications. But a new examination of the pact has found that so-called "dual tracking" is actually still legal — and now attorneys general and the national settlement's monitor are scrambling to revise the agreement with the intent of banning the practice once and for all.

The misunderstanding came to light last week with settlement monitor Joseph A. Smith's first report on servicer violations in which Smith said he wants servicers to halt dual tracking as soon as a borrower files initial paperwork for a loan modification.

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