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120 Foreclosure Rule

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  • #5940
    rcooper
    Keymaster

    A question we received from a member:

    We have a question regarding the 120 foreclosure rule. Previously when we had attorney letters sent to customers on the bank’s behalf it included wording like “ This delinquency may affect your credit and ability to borrow in the future. Failure to make this loan current could lead to foreclosure.” Because of the new regulations, we had the attorney to remove the wording regarding foreclosure, since we aren’t allowed to start or threaten foreclosure until the loan is 120 days past due. Although we are not threatening foreclosure in those letters any longer and simply state that the payment is past due and for the customer to please contact the bank, will the examiners look at those attorney letters and scrutinize them as though we are simply trying to skirt the issue and is there any repercussions we might face?

    #5941
    rcooper
    Keymaster

    See the commentary below, as well as a discussion of these comments linked here beginning on page 86: https://files.consumerfinance.gov/f/201309_cfpb_titlexiv_updates.pdf. It sounds like you process will be acceptable, but I think you should review your letter/process as well as this information and you’ll have your answer.

    41(f) Prohibition on foreclosure referral.
    1. Prohibited activities. Section 1024.41(f) prohibits a servicer from making the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process under certain circumstances. Whether a document is considered the first notice or filing is determined on the basis of foreclosure procedure under the applicable State law.
    i. Where foreclosure procedure requires a court action or proceeding, a document is considered the first notice or filing if it is the earliest document required to be filed with a court or other judicial body to commence the action or proceeding (e.g., a complaint, petition, order to docket, or notice of hearing).
    ii. Where foreclosure procedure does not require an action or court proceeding, such as under a power of sale, a document is considered the first notice or filing if it is the earliest document required to be recorded or published to initiate the foreclosure process.
    iii. Where foreclosure procedure does not require any court filing or proceeding, and also does not require any document to be recorded or published, a document is considered the first notice or filing if it is the earliest document that establishes, sets, or schedules a date for the foreclosure sale.
    iv. A document provided to the borrower but not initially required to be filed, recorded, or published is not considered the first notice or filing on the sole basis that the document must later be included as an attachment accompanying another document that is required to be filed, recorded, or published to carry out a foreclosure.

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