Can a mortgage lender foreclose on my home without providing a single point of contact?
Under new single point of contact rules, mortgage lenders and servicers must assign one person or team to your account if you are seeking foreclosure help.
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My lender denied my HAMP application and then transferred me to several different people in different departments. Eventually the lender denied my application for a short sale and a deed in lieu of foreclosure. Can the lender do this?
Generally no. In most cases, the loan servicer is supposed to appoint a single point of contact or a designated team to help you through the entire loss mitigation process if you are seeking an alternative to foreclosure. Although this requirement depends on what type of loan you have, where you live, and/or who your loan servicer is.
Servicing Reforms Generally Require a Single Point of Contact
In the past, homeowners who called their loan servicers (the company you make your payments to and that handles loss mitigation activity) seeking an alternative to foreclosure such as a loan modification, short sale, or deed in lieu of foreclosure had to explain their circumstances repeatedly, often to several different representatives. This made the process very frustrating and frequently unsuccessful.
This problem has been addressed on several fronts by:
- the federal government
- some states, and
- the national mortgage settlement.
Generally, these new rules require servicers to provide a single point of contact (or specific team of personnel) to assist a homeowner who requests help in avoiding foreclosure.
In 2009, the federal government introduced the Making Home Affordable program to help homeowners stay in their houses and avoid foreclosure. The main program under the Making Home Affordable initiative is the Home Affordable Modification Program (HAMP), which modifies loans to make them more affordable for borrowers. (Learn about HAMP and other programs under the Making Home Affordable initiative.)
Servicers other than Fannie Mae or Freddie Mac. Making Home Affordable guidelines require large servicers of non-GSE mortgages (those not owned or guaranteed by Fannie Mae or Freddie Mac) to appoint what they call “relationship managers” to serve as the homeowner’s single point of contact when evaluating that homeowner for a HAMP modification.
The relationship manager is supposed to work with the borrower until all available options have been exhausted for keeping the home (such as a loan modification) or getting rid of the home without foreclosure (such as a short sale or deed in lieu of foreclosure).
If it is necessary to change the single point of contact (for example, the relationship manager is fired, work responsibilities change, or is on extended leave), the servicer must provide written notification of the changed contact information to the homeowner within five business days after the new point of contact is assigned.
Small servicers. While these requirements apply only to large servicers, the U.S. Treasury encourages all mortgage servicers that participate in HAMP to provide borrowers with a single point of contact, and most have agreed to do so. (Though just how this is done is left up to the servicers.)
Fannie Mae and Freddie Mac. Fannie Mae guidelines require and Freddie guidelines encourage servicers to assign a relationship manager to serve as the borrower’s single point of contact in the loss mitigation process. (To find out if either Fannie Mae or Freddie Mac owns your loan, go to www.fanniemae.com/loanlookup and www.freddiemac.com/mymortgage.)
New Federal Mortgage Servicing Rule Requires Single Point of Contact
On January 10, 2014, new federal mortgage servicing rules went into effect. Among other things, one of the rules requires “continuity of contact.” The servicer must assign a person or a team of personnel to respond to a delinquent borrower's inquiries and assist the borrower with available loss mitigation options not later than the 45th day of the borrower's delinquency. (Learn more about the New Federal Rules Protecting Homeowners With Mortgages.)
Exception to the continuity of contact rule. The continuity of contact rule does not apply to:
- open-end lines of credit
- reverse mortgages
- qualified lenders under the Farm Credit System
- any loan that is secured by a property that is not the borrower’s principal residence, and
- small servicers (those that service no more than 5,000 loans) and certain government agencies.
California and Nevada Require a Single Point of Contact
If you live in California or Nevada, state law requires certain mortgage servicers to designate a single point of contact or a team of personnel for homeowners who request loan modifications or other foreclosure prevention alternatives.
The contact person must remain assigned to the account until all loss mitigation options are exhausted or until the account is brought current. (Learn more about the California Homeowner Bill of Rights and the Nevada Homeowner’s Bill of Rights.)
Requirements Under the National Mortgage Settlement
The national mortgage settlement with five of the largest mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) set new standards for the servicing of loans, particularly loans in foreclosure. (Read more about the terms of the settlement in Nolo’s article National Mortgage Settlement: New Rules Help Protect Homeowners in Foreclosure.)
One of the standards under the settlement is that borrowers have the right to deal with a reliable, single point of contact throughout the loss mitigation, loan modification, and foreclosure process. This means that the single point of contact is supposed to not only help with the HAMP process, but also assist a borrower who is ineligible for HAMP in pursuing other options to avoid foreclosure, such as a short sale or deed in lieu of foreclosure.
When to Hire an Attorney
If your loan servicer has violated the single point of contact requirement, you should immediately consult with an attorney to get advice on what to do in your particular circumstance.