In most cases, a mortgage servicer—the company that manages your loan account—can’t start a foreclosure until you’re more than 120 days delinquent on the loan. Though, under certain circumstances, the process might start sooner. To learn more about when a foreclosure can start, read on.

Federal Law Requires a 120-Day Preforeclosure Period

Federal law generally prohibits the servicer from making the “first notice or filing” to start a judicial foreclosure or nonjudicial foreclosure until the borrower is over 120 days behind on payments. (12 C.F.R. § 1024.41).

What’s the First Notice or Filing?

Your state’s foreclosure procedures determine which document is considered the first foreclosure notice or filing.

• In a judicial foreclosure (that is, when state law requires a court action or proceeding to foreclose), the first notice or filing is the earliest document filed with a court to start the foreclosure, like a complaint, petition, order to docket, or notice of hearing.
• In a nonjudicial (or "power of sale") foreclosure, the first notice or filing is the earliest document that’s recorded in the land records, like a notice of default, or published to start the foreclosure process.
• If your state’s foreclosure laws don’t require a court filing or proceeding, and don’t require a foreclosure document to be recorded or published, the first notice or filing is the earliest document that establishes, sets, or schedules a date for the foreclosure sale.

A document that you get as part of the foreclosure process—but that isn’t initially required to be filed, recorded, or published—isn’t considered the first notice or filing even if the servicer later includes the document as an attachment along with another document that’s filed, recorded, or published as part of the foreclosure.

Purpose of the 120-Day Period

The 120-day time frame gives you time to work out a way to avoid foreclosure. If you apply for a loss mitigation option during this time, the foreclosure start date might get pushed out even further. (Learn more about the federal law that prevents a servicer from starting or continuing a foreclosure under certain circumstances in Federal Laws Protecting Homeowners: Foreclosure Protections.)

Applicability

The 120-day rule applies to mortgage loans that are secured by a property that is the borrower's principal residence. (12 C.F.R. § 1024.30). Though, whether the property is considered the borrower's principal residence 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 his or her principal residence immediately prior to displacement, intends to return to the property at some time in the future, and doesn't own any other residential property.

While small servicers are exempt from some of the requirements under federal mortgage servicing laws, they must adhere to the 120-day rule, assuming the property and loan meet the other criteria. The 120-day law applies to both first lien and subordinate lien federally related mortgage loans, although it expressly does not apply to open-end lines of credit (home equity plans), or certain other types of exempt loans. (12 C.F.R. § 1024.31).

The 120-Day Rule and Non-Monetary Breaches

The 120-day required delay on starting a foreclosure also generally applies in the case of a non-monetary breach of the loan contract, like:

• failing to pay property taxes if they aren’t escrowed
• committing waste (causing damage that reduces the home’s value), or
• failing to live in the home if the mortgage contract requires it.

(Learn more in 120-Day Foreclosure Prohibition: Breaches Other Than Non-Payment.)

When a Foreclosure Can Start Sooner

The 120-day rule does not apply in the following situations:

• If the reason for the foreclosure is that you violated a due-on-sale clause. (Many, if not most, loan contracts contain a “due-on-sale” provision. This clause states that if you transfer the property to a new owner, then the lender will accelerate the full loan balance. This means you have to repay the entire balance of the loan otherwise a foreclosure will begin. Though, federal law restricts the enforcement of a due-on-sale clause in some circumstances.)
• When the servicer is joining the foreclosure action of a superior or subordinate lienholder. (Superior lienholders are sometimes called "senior lienholders." Subordinate lienholders are also sometimes called "junior lienholders." To learn more about lienholders, see What is Lien Priority?)

Getting Help

If you think that your mortgage servicer has improperly started a foreclosure during the 120-day pre-foreclosure period, consider talking to a local foreclosure attorney. You might be able to stop the foreclosure, at least temporarily, which could buy you some time to work out an alternative, like a loan modification.

To find out how to apply for a loss mitigation option, call your mortgage servicer. If you need more information about different ways to avoid foreclosure, consider contacting a HUD-approved housing counselor. (Read about the benefits of using a HUD-approved housing counselor.)

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