But some loan servicers don’t have to comply with many of these laws. And not all loans and properties qualify for protection.
Under Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA), most mortgage servicers must take certain steps and provide specific protections to borrowers facing foreclosure.
The servicer has to try to make live contact with you to discuss loss mitigation options no later than 36 days after you miss a payment and again within 36 days after each missed payment—even if the servicer previously contacted you. But if you’re in bankruptcy or have asked the servicer to stop communicating with you under the Fair Debt Collection Practices Act (FDCPA), and the servicer is subject to this law, the servicer doesn’t have to try to make contact with you. (12 C.F.R. § 1024.39).
The servicer has to send you a written notice no later than the 45th day after a missed payment—and once every 180 days after that as long as the loan is delinquent—to tell you about loss mitigation options. If you've filed bankruptcy or asked the servicer not to communicate with you, it generally has to send a special kind of letter, subject to some exceptions. (12 C.F.R. § 1024.39).
The servicer has to assign a single person or a team of personnel to help you with loss mitigation no later than the 45th day of the delinquency. (12 C.F.R. § 1024.40).
The servicer can’t start a foreclosure until you’re more than 120 days delinquent unless the foreclosure is based on a violation of a due-on-sale clause or the servicer is joining the foreclosure action of a superior or subordinate lienholder. (12 C.F.R. § 1024.41).
If you send the servicer a complete loss mitigation application before foreclosure starts, the servicer can’t initiate the foreclosure process unless:
If you send the servicer a complete loss mitigation application after foreclosure starts—but more than 37 days before a foreclosure sale—the servicer can’t ask a court for a foreclosure judgment or order of sale, or conduct a foreclosure sale, until one of the three conditions mentioned above has been satisfied. Be aware that the servicer generally doesn't have to review more than one loss mitigation application from you. But if you bring the loan current after submitting an application and then reapply, the servicer must consider your new application. (12 C.F.R. § 1024.41).
Small servicers are exempt from the majority of these requirements.
A small servicer is defined as one that:
Small servicers don’t have to comply with the requirements previously discussed in this article, except:
These federal laws apply to mortgage loans secured by a property that is the borrower's principal residence. The determination of principal residence status depends on the specific facts and circumstances regarding the property and applicable state law. For example, a vacant property might still be a borrower’s principal residence under certain circumstances, like when a servicemember relocates due to permanent change of station orders and was living at the property as a principal residence immediately before displacement, intends to return to the property sometime in the future, and doesn't own any other residential property.
In most cases, the laws don't apply to:
If you think your servicer is violating federal mortgage servicing laws, consider talking to a foreclosure attorney to discuss your options. If you want to learn about different ways to avoid a foreclosure or need help completing a loss mitigation application, consider contacting a HUD-approved housing counselor.