Dual-Tracking Protections Under Federal Regulation X and Puerto Rico Law 169

Puerto Rico Law Controversies

Dual-Tracking Protections Under Federal Regulation X and Puerto Rico Law 169: Bank Not Barred from Foreclosure Where Loss Mitigation Application Was Incomplete

Prepared March 15, 2026

Court: Tribunal de Apelaciones de Puerto Rico

Date: February 27, 2026

Citation: Banco Popular de Puerto Rico v. Melóndez Torres, 2026 WL 710303 (TCA)

Summary of Relevant Facts

On May 31, 2022, Banco Popular de Puerto Rico filed a complaint against Ferdinand Melóndez Torres and related defendants seeking payment of an outstanding debt of $254,240.69 plus accumulated interest, and execution of the mortgage on residential property through public auction sale. The defendants raised defenses based on loss mitigation protections, arguing the bank was barred from foreclosure.

Procedural Background

On October 23, 2025, defendants filed a Motion to Dismiss for Non-Compliance with Law 169 of 2016 and 12 C.F.R. § 1024.41(f), raising three arguments: (1) BPPR was barred because a loss mitigation request was pending (though incomplete) and should be considered "facially complete" under dual-tracking protections; (2) BPPR was barred because it had certified that the debtor completed a loss mitigation request; and (3) BPPR violated § 1024.41(e)(1) of Regulation X by providing late and bad faith notification of a short sale offer without the required 14-day minimum notice period. The trial court denied the motion to dismiss and denied the motion for reconsideration. Defendants sought certiorari review.

Main Controversies

The central controversy was whether an incomplete loss mitigation application could be deemed "facially complete" for purposes of triggering the dual-tracking protections under 12 C.F.R. § 1024.41(c)(2)(iv) and Puerto Rico Law 169 of 2016, thereby barring the bank from proceeding with foreclosure. The intersection of federal Regulation X with Puerto Rico's own mortgage foreclosure protections created a complex regulatory overlay that the court was asked to parse.

Position of the Parties

The defendants argued that their loss mitigation request, though incomplete, should be treated as facially complete for dual-tracking protection purposes, and that the bank's certification and short sale notice practices violated federal and Puerto Rico law. Banco Popular argued that an incomplete application does not trigger dual-tracking protections and that it complied with all applicable regulatory requirements.

Holding or Decision

The Tribunal de Apelaciones denied the certiorari petition, effectively affirming the trial court's denial of the motion to dismiss.

Reasons for the Decision

The court applied the discretionary factors for certiorari review under Rule 40 of the Court of Appeals Rules and Rule 52.1 of the Puerto Rico Rules of Civil Procedure. After examining the interlocutory resolution, the court found no evidence that the trial court acted with partiality, abused its discretion, or issued a decision contrary to law. The trial court had appropriately evaluated the parties' positions regarding loss mitigation request procedures, loss mitigation certifications, and short sale notice requirements. The decision underscores the interplay between federal mortgage servicing regulations and Puerto Rico's own foreclosure protection framework, and the deference afforded to trial courts in parsing these overlapping regulatory requirements at the interlocutory stage.