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#1894806 - 02/07/14 03:38 PM Past Due/Foreclosure Related Questions
leo_bsayer Offline
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1. Is there any prohibition against calling a note due if the customer is severly past due to not contend with the foreclosure process? (Please don't shoot the person asking the question. I feel I know the answer, but I'm asking anyway.)

2. If someone is living in a mobile home, it is their primary residence, so the LM procedures would apply, correct?

3. If someone abandons his property and the bank discovers the abandonment, the bank must still wait the 120 days to foreclose, correct?

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Mortgage Servicing Rules
#1894939 - 02/07/14 05:31 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
leo_bsayer Offline
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For question number 1, would it be appropriate to have a 1st 15 day past due notice , 2nd 30 day past due (or default) notice, 3rd 45 day past due notice, 4th 50 day notice that demands the note to be paid in full. Between the 60th and 120th day, if borrower attempts to make a partial payment, refuse anything but the full amount of the note. Start forclosure on the 120th day. What are your thoughts on this? By the way, the note does have a demand clause that states if you ever miss a payment, the note can be called in full.

Additionally, it wouldn't circumvent any foreclosure process.
Last edited by leobsayer; 02/07/14 07:53 PM.
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#1894972 - 02/07/14 06:00 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
dblack Offline
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1.- I wouldn't want to try and explain that one to a judge or regulator.

2.- The LM procedures are a RESPA requirement so if it is a MH only they would not apply. If you took dirt too, you must follow them.

3.) There is some discussion about this going on in another thread. My position is: Yes- wait 120 days.
http://www.bankersonline.com/forum/ubbth...434#Post1894434
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#1894975 - 02/07/14 06:06 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
leo_bsayer Offline
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Thank you for the response dblack. The thread below seems to discuss what I was trying to attempt to ask regarding question 1.

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1888365

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#1895077 - 02/07/14 07:52 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
leo_bsayer Offline
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RLcarey, would you mind giving me your opinion on my second post above?

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#1895121 - 02/07/14 08:20 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
dblack Offline
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Originally Posted By: leobsayer
Between the 60th and 120th day, if borrower attempts to make a partial payment, refuse anything but the full amount of the note. Start forclosure on the 120th day. What are your thoughts on this?


I'm not a lawyer, don't play one on TV, and didn't stay at a Holiday Inn Express last night but I think that goes against the spirit of the regulation. 1026.36 says you have to credit any full periodic payment as of the date of receipt. IMO, one of the reasons for this is so that the borrower may stay in their home as long as possible.
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#1895131 - 02/07/14 08:27 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
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Could the demand letter not state the new periodic payment amount was the balance of the loan?

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#1895316 - 02/10/14 03:27 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
John Burnett Offline
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There is a reason for the 120 days delinquent requirement, and it is precisely to try to avoid foreclosure and throwing people out of their homes unless they are at least 120 days past due. The Bureau did tweak the restriction in section 1024.41(f)(1) to allow for moving faster if there is a violation of a due on sale clause or if a junior lienholder has commenced foreclosure.

A periodic payment is the one that is spelled out in the loan agreement, not one that's imposed by dint of a demand notice.

I think that attempting to advance the process in ways not contemplated by the 120-day requirement will be frowned up by the courts. Even if you think it's legit to do so, I strongly recommend you run the idea by legal counsel familiar with the Bureau's servicing rules and state law.
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#1895357 - 02/10/14 04:19 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
John Burnett Offline
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I did some more reading, and I am going to reverse at least part of my response above. In the prefatory comments to the publication of the Regulation Z Servicing Rule, we see the following in a discussion of the prompt crediting rule at 1026.36(c)(1):

Because the definition of "periodic payment" is intended to reflect the consumer's contractual obligation, to the extent a consumer's mortgage loan has been accelerated (such that the periodic payment constitutes the total amount owed for all principal and interest), or that certain obligations for force-placed insurance or delinquent taxes have been paid through the escrow account, those amounts may be appropriately accounted for within this definition of a periodic payment. [78 FR 10954]

So it appears you could refuse a consumer's attempt to pay only part of the full balance and interest due once a formal demand notice has been sent in conformity with the loan contract, even if the loan is not 120 days delinquent.

I will stick to my recommendation that you run the practice by legal counsel familiar with state law and the terms of the loan contract.
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#1895378 - 02/10/14 04:41 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
leo_bsayer Offline
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John, thank you for replying. This has been one of the most cumbersome aspects to understand.

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#1895558 - 02/10/14 08:30 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
John Burnett Offline
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I agree. It would have been nice to see it discussed in the Commentary instead of only mentioned in the prefatory information.
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#1896644 - 02/12/14 09:53 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
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Here's an additional question: When one loan is in default, in the past we have called all related loans due. Currently we have a loan in default (>60 days past due) where the loan officer wants us to send a demand letter calling the loan due in full. This loan is coded agricuture, and the related loan is a 1-4 family residential that is current. Is this permissible?

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#1896648 - 02/12/14 09:55 PM Re: Past Due/Foreclosure Related Questions leo_bsayer
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No. Not if the demand letter is part of the foreclosure process. I would also suggest that you have a sit-down with your legal counsel as I doubt that your 1-4 family residential loan contract would support that sort of action.
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