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:
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.
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.
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.
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.
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.
The 120-day foreclosure restriction also generally applies in the case of a non-payment-related breach of the mortgage.
In addition to requiring a borrower to make payments to repay a loan, most mortgage contracts also 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.
For more information, see the CFPB's Factsheet on Delinquency and the 2016 Mortgage Servicing Rule.
Consider talking to a foreclosure attorney if your mortgage servicer has violated the 120-day rule.
For more information about the federal mortgage servicing rules, including the 120-day rule, go to the CFPB website. Search for "mortgage servicing rules."