120-Day Foreclosure Prohibition: Breaches Other Than Non-Payment

Federal mortgage servicing laws protect borrowers when it comes to foreclosures. For instance, under federal law, a loan servicer can't officially start a foreclosure until the borrower is more than 120 days delinquent on the payments.

Also, this 120-day delay on starting a foreclosure applies in the case of a nonmonetary breach of the mortgage contract, like:

• failing to pay the property taxes or maintain homeowners' insurance
• committing waste (causing damage that lowers the home's value)
• violating the law while on the property, and
• not occupying the home when the mortgage requires it.

Federal Mortgage Servicing Laws

In 2010, the federal government passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which gave the Consumer Financial Protection Bureau (CFPB) the authority to create new mortgage servicing rules. The CFPB's final mortgage servicing rules were implemented under the Real Estate Settlement Procedures Act (RESPA), also known as Regulation X, and the Truth in Lending Act (TILA), known as Regulation Z.

These rules, which went into effect on January 10, 2014, created established national mortgage servicing standards and imposed new foreclosure requirements for lenders and servicers.

Delaying Foreclosure: The 120-Day Rule

Under federal law, a servicer can't make the first notice or filing required under applicable law for any judicial or nonjudicial foreclosure until the mortgage loan obligation is more than 120 days delinquent.

When Are You Considered Delinquent on a Mortgage Loan?

Borrowers become "delinquent" starting on the date that a periodic payment sufficient to cover principal, interest, and, if applicable, escrow becomes due and unpaid until the time when no periodic payment is due and unpaid.

What Is the First Foreclosure Notice or Filing in Judicial Foreclosures?

In a judicial foreclosure, the first filing is the earliest document the servicer files with a court, like a complaint, petition, order to docket, or notice of hearing.

What Is the First Foreclosure Notice or Filing in Nonjudicial Foreclosures?

In a nonjudicial foreclosure, the first notice is the initial document a servicer records or publishes as part of the foreclosure process.

If your state's foreclosure laws don't require a court filing, or a recorded or published document, as part of the foreclosure process, the first notice is the earliest document that establishes, sets, or schedules a date for a foreclosure sale.

120-Day Rule Also Applies to Nonmonetary Breaches

The 120-day foreclosure restriction also generally applies in the case of a non-payment-related breach of the mortgage.

What Is a Non-Payment-Related Breach?

In addition to requiring a borrower to make payments to repay a loan, most mortgage contracts require the borrower to do certain things, like pay property taxes if the loan isn't escrowed. Mortgage contracts also require the borrower to refrain from doing certain things, like allowing the property to deteriorate or committing waste.

Other nonmonetary breaches include failing to maintain homeowners' insurance, violating the law while on the property, and not occupying the home when the mortgage requires it.

Learn More

For more information, see the CFPB's Factsheet on Delinquency and the 2016 Mortgage Servicing Rule.

Talk to an Attorney

Consider talking to a foreclosure attorney if your mortgage servicer has violated the 120-day rule.

To get information about ways to avoid a foreclosure, like by getting a mortgage modification, consider talking to a HUD-approved housing counselor.

For more information about the federal mortgage servicing rules, including the 120-day rule, go to the CFPB website. Search for "mortgage servicing rules."