If you’re going through a foreclosure and your loan servicer (the company that manages your loan account) doesn't follow certain federal mortgage servicing laws, you might be able to use the servicer's noncompliance as a way to delay or cancel the foreclosure—or at least buy yourself enough time to work out an alternative to foreclosure, like a modification.
In early 2014, federal mortgage servicing regulations went into effect. In 2017, these laws changed to better protect homeowners. The laws require servicers to take various steps that open up the lines of communication with the homeowner early on and provide the homeowner with the opportunity to explore alternatives to foreclosure. For instance, the servicer must contact you soon after you fall behind in mortgage payments to discuss alternatives to foreclosure and may not dual-track your loan, among other things. These regulations apply to most servicers, though there are a few exceptions. (Get details about the federal laws that protect homeowners in foreclosure.)
Some foreclosure defense attorneys have been able to use a servicer's violations of the federal laws as a tactic to delay a foreclosure or get a foreclosure dismissed. For example, under the federal laws, if the servicer has already started a foreclosure and receives your complete loss mitigation (foreclosure avoidance) application more than 37 days before a foreclosure sale, the servicer may not move for a foreclosure judgment or order of sale, or conduct a foreclosure sale, until:
If your attorney can show that you submitted your complete loan modification application to the servicer 38 days or more before the scheduled sale date—but the servicer did not review it—then the court might cancel the sale. The court will probably reset the sale for a different date, but this delay just might give you enough time to work out an alternative to foreclosure.
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, the servicer must consider it.
Judicial foreclosures. If your foreclosure is judicial, you can bring up violations of the regulations in the existing foreclosure lawsuit, though you'll have to meet certain deadlines and do it in the proper way.
Nonjudicial foreclosures. Unlike in a judicial foreclosure, homeowners facing nonjudicial foreclosure don’t get an automatic means to mount a legal challenge to the foreclosure. To have your defenses ruled on by a judge in these states, you have to file a lawsuit alleging that the foreclosure is illegal for some reason and asking the court to put the foreclosure on hold pending the court's review of the case.
Raising a violation of the federal laws as part of a foreclosure defense strategy can be complicated. If you want to successfully delay or stop the foreclosure, consider talking to an attorney who can advise you what do in your particular situation. A qualified foreclosure defense attorney might be able to use a servicer’s violations of the laws to gain some leverage in the foreclosure proceedings, delay the foreclosure, or give you the opportunity to explore workout options before the foreclosure goes forward. Also, you may have other valid defenses to a foreclosure and consulting with a licensed attorney in your state is a good way to find out about options in your particular circumstances.
You may also file a complaint about a servicer’s violations regarding the federal laws with the Consumer Financial Protection Bureau (CFPB) by going to the CFPB website or by calling 855-411-2372. The CFPB will forward your complaint and any documents that you provide to the servicer and try to get a response from them. (Or, if the CFPB thinks that another government agency would be better able to help you, it will forward your complaint to that agency and let you know.) But be aware that filing a complaint with the CFPB is highly unlikely to stop foreclosure proceedings. To stop a foreclosure, you'll most likely need an attorney's assistance.