I have a customer who has moved out of his primary residence and into an assited living facility. There is non-owner family member living in the house. The customer told us he can no longer afford his house payment and is not going to pay it.

Do we have to wait 120 days before foreclosing? At what point can we say it is not the customer's "Primary Residence" or what would be the best way to document this (e.g. change of address?)

They half-way address this in the preamble.. Basically saying it should be considered on a case-by-case basis and they don't give any details on how to document.

I would be interested to hear what others would consider doing in this situation. We had many discussions about this earlier in the year and we basically just decided to re-visit the discussion when we run into one of these situations.


From the Preamble..

"Finally, the Bureau notes that several commenters requested that the Bureau exempt
vacant or abandoned properties from the 120-day prohibition. However, while many
commenters asserted that there is a limited benefit to prohibiting foreclosure referral where a
property is “vacant” or “abandoned’, they also generally agreed that such a determination
depends on the individual facts and circumstances, and may vary according applicable State law.
While some commenters suggested the Bureau adopt a multiple-factor test to determine whether
a property was “abandoned,” the Bureau believes any such test would inherently rely on a
holistic determination based on individual facts and circumstances, and would not provide the
clear guideline that the Bureau believes is appropriate with respect to the prohibition on
foreclosure referral. Moreover, as noted by consumer groups, a number of borrower protection
concerns could arise from affording servicers too much discretion in determining whether a
property is abandoned or vacant. In addition, some industry commenters conceded that it would
be rare for a property to be determined abandoned or vacant earlier than the 120th day of
delinquency.
For these reasons, the Bureau is not adopting an exclusion from the 120-day prohibition
for vacant or abandoned properties. However, the Bureau notes that the provisions of
§§ 1024.39 through 1024.41 apply only to a mortgage loan secured by property that is a
borrower’s principal residence. See 12 C.F.R. § 1024.30(c)(2). Thus, depending on the facts and
circumstances, it is possible that some foreclosures against vacant or abandoned properties will
not be subject to § 1024.41(f).
"

Thank you dblack for the reply!

Of all of the things i have trained on in the last couple of months--THIS subject has brought the most questions from my lenders!

It has prompted a lot of talk in our shop too.

My position has been: Treat the loan as it was when closed. Too much grey area for my tastes to try and go back and prove it is no longer a PR. That may be easier in the situation you noted, though.

I agree with dblack, we are waiting 120 days if it was a primary residence before the delinquency occurred. There is always a chance the borrower may move back into the home or they could change their mind and that would just be a headache to deal with later.

Just keep in mind that some hazard policies do not cover vacant or abandoned homes. If you have reason to believe that the home has been abandoned, make sure the hazard policy in place will still cover it.

I wasn't able to find the above text in the Preamble so I have the resource to defend our decision in a situation in which the owner who had vacated the property and has subsequently did. Would you please provide the link to the resource?

Here is a link to the paragraph in the Prefatory Text to the 10/1/13 Federal Register publication of the Servicing Rule Amendments that is quoted by dblack in the February 6 post above: http://www.federalregister.gov/a/2013-22752/p-202

Thank you, John. If there is any situation in which the property is vacant or abandoned and the 120-rule might be exempted, it would hopefully be when an occupant is deceased.

Yes, but, before you take the swan-dive off the 25-meter foreclosure board, it would be good to determine if there are successors at interest -- the decedent's estate, heirs, etc. -- whom you should try to work with first.