How Soon Can Foreclosure Begin?

Federal law generally prohibits a mortgage servicer from making the "first notice or filing" (see below) to start a judicial foreclosure or nonjudicial foreclosure until a borrower's mortgage loan obligation is more than 120 days delinquent.

However, under some limited circumstances, the process might start sooner.

What Happens When You Miss a Mortgage Payment?

You won't go into foreclosure immediately just because you miss a mortgage payment. Here's what typically happens during the 120 days before foreclosure starts.

What Happens If I Miss a Month of Mortgage Payment?

After you miss a mortgage payment and the grace period expires, the servicer can charge a late fee to your account.

How late can you be on a mortgage payment? Usually, the grace period is between ten and fifteen days.

How much is the late charge? The late charge will typically be between four and six percent of your payment amount. To find out the exact amount of the late charge the servicer can charge you after each missed payment, review the promissory note that you signed when you took out the loan or look at your monthly mortgage payment statement. Some states have a law that limits late charges. If the state limit is lower than what the promissory note allows, state law generally overrides the note.

Your Second Missed Payment: You'll Learn About Loss Mitigation Options

Under federal law, in most cases, servicers are supposed to work with borrowers who are having trouble making their monthly payments by contacting them in person and in writing to go over loss mitigation options.

Your Third and Fourth Missed Payments

Once you're about 90 days behind on payments, the servicer will likely send you a breach letter. Most mortgages and deeds of trust require the lender to send this type of letter before accelerating the loan.

The breach letter typically gives 30 days to reinstate the loan and avoid a foreclosure. State law might also provide a right to reinstate the loan, even after foreclosure begins.

Then, once you're more than 120 days delinquent on mortgage payments, a foreclosure can start. (12 C.F.R. § 1024.41).

How Many Payments Can You Miss On a Mortgage?

After you've missed the deadline to reinstate that's given in the breach letter, and you're more than 120 days behind on your mortgage payments, the servicer will usually refer the loan to an attorney or trustee. Then, the lender's attorney or the foreclosure trustee can begin the foreclosure process by making the first notice or filing.

If you've applied for loss mitigation, though, and that application is still pending, federal law and, in some cases, state law, prevent the foreclosure from starting until the servicer reviews your application (see below).

What Is 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, 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. (12 C.F.R. § 1024.41(f), see official comment).

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.

When a Foreclosure Can Start Sooner

However, under some limited circumstances, the process might start sooner. The 120-day rule doesn't 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 the lender can accelerate the full loan balance if you transfer the property to a new owner. 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.")

What About Rolling Delinquencies?

When a mortgage loan is delinquent, and the borrower makes a payment, the servicer must advance the delinquency date (if the servicer normally applies the payment to the oldest outstanding periodic payment). So, if you miss a payment, you might remain delinquent for an extended time in a "rolling" delinquency.

Example of a Rolling Delinquency

Here's how a rolling delinquency might happen: Suppose you skip one payment. The next month, you make a full payment on the due date, including principal, interest, and escrow. Over the next few months, you make regular, on-time monthly payments, but don't ever pay the missed payment to get current on the loan.

Instead, you remain 30 days delinquent for an extended amount of time. In theory, the servicer can't start a foreclosure during this rolling delinquency because you haven't become more than 120 days delinquent.

How Servicers Can Handle Borrowers With Rolling Delinquencies

But the Consumer Financial Protection Bureau (CFPB), which issued the 120-day rule, has noted that servicers may have alternative means for addressing situations in which a rolling delinquency might prevent the initiation of a foreclosure, such as acceleration of the loan. (See paragraph 4 of the official interpretations of 12 C.F.R. § 1024.31).

The official interpretation says, "This subpart does not prevent a creditor from exercising a right provided by a mortgage loan contract to accelerate payment for a breach of that contract. Failure to pay the amount due after the creditor accelerates the mortgage loan obligation in accordance with the mortgage loan contract would begin or continue delinquency."

So, the servicer might accelerate the loan in the above situation, requiring you to pay the total mortgage debt by a specific deadline. If you don't repay the full amount of the loan by the deadline, you'll be one day delinquent on the day after the due date. Once you're 120 days delinquent, the servicer could start a 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.

Further Restrictions on Starting a Foreclosure

Under federal law, even if you're more than 120 days delinquent, if you submit a complete loss mitigation application before the servicer makes the first notice or filing required to initiate a foreclosure process, the servicer can't start the foreclosure process unless:

• the servicer informs you that you're not eligible for any loss mitigation option and any appeal has been exhausted
• you reject all loss mitigation offers, or
• you fail to comply with the terms of a loss mitigation option such as a trial modification.

To learn more about how foreclosure works in your state, see our Key Aspects of State Foreclosure Law: 50-State Chart.

Applicability of the 120-Day Rule

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 some circumstances, like when a servicemember relocates due to a permanent change of station orders and was living at the property as a 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 doesn't apply to open-end lines of credit (home equity plans), reverse mortgages, and some other types of exempt loans, like loans for which the servicer is a qualified lender under the Farm Credit Act of 1971. (12 C.F.R. § 1024.31, 12 C.F.R. § 1024.30).

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.

Getting Help

If you think that your mortgage servicer has improperly started a foreclosure during the 120-day preforeclosure 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.

Call your servicer to find out how to apply for a loss mitigation option. If you need more information about different ways to avoid foreclosure, consider contacting a HUD-approved housing counselor.