We have a borrower who is multiple years delinquent in paying his taxes, but only 30 days past due on his loan payment. Must we wait until the Payment is 120 days past due before we can call it "in default" and start foreclosure action? Or, does the 3 years of past due taxes suffice? We are not an escrow bank and just learned of the severe delinquency on this loan.

We are considered a "small creditor".

No small servicer (which is different than small creditor, but I assume you qualify for both) exemption for 120 day clock.

The preamble to the new rule suggests you accelerate the balance of the loan based on breach in these situations. Then the 120 day clock can begin (or continue) when they don't pay in full.

Thank you for your answer. And yes, we are both smalls. Had been dealing with small creditor issues prior to posting and used wrong title. And I know we are not exempt from the 120 day rule. My question, to clarify, is whether the 120 day rule is strictly the loan payments due or would it come into play with the delinquent tax bill? Because we have met the 120 days with the tax bill, but not the payments. Both are reason of default.

Just because the tax bill is due, it does not make the loan 120 past due. As IH indicated, you would call the loan based on the failure to pay the taxes (assuming that is a default under your loan agreement) and then after 120 days, you could foreclose. There is no other provision that allows foreclosure because of default on another condition within the loan agreement other than the due on sale clause or foreclosure action by another creditor.

Thank you, rlcarey. That is the clarification I needed in terms I can relate to officers. Sorry, but I needed someone to dummy it down for me today. I now see what IH was saying. Thank you both for responding.