Foreclosure Actions

It's been a few years since we have foreclosed on a piece of property so I am a little rusty. Just to clarify: until a customer is 120 days delinquent, bank cannot send letters mentioning Foreclosure Actions; bank can only send letters asking for payments. When customer is >120 days past due, we can send demand letter for payment in full or foreclosure actions? Thanks

Mentioning foreclosure action in a letter prior to the time that the bank is prepared to initiate an action, well that is going to be a State law issue. Here is the Regulation, but you need to read the commentary carefully and sit down with you legal counsel that assists in foreclosure actions regarding what notices are required in your State under the type of foreclosure you will be using.

1024.41(f) Prohibition on foreclosure referral. (1) Pre-foreclosure review period. A servicer shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless:

(i) A borrower's mortgage loan obligation is more than 120 days delinquent;

(ii) The foreclosure is based on a borrower's violation of a due-on-sale clause; or

(iii) The servicer is joining the foreclosure action of a superior or subordinate lienholder.

Nothing in federal regs says you can't mention foreclosure prior to 120 days. You just can't start the foreclosure process. You'll have to look to state law to see what your foreclosure process looks like and what the "first notice or filing" is in the jurisdiction, but there's nothing prohibiting you from informing the borrower that you plan to foreclose in the future if they don't pay. In fact, there may be state laws requiring you do so if you actually want to start the process at 120 days. You'll want to talk to counsel.

Could I tag a question on to this thread? Would this be 1-4 family residence with land or would this include a mfg home loan not attached to real estate or no real estate taken as collateral? Thanks in advance

No dirt - no coverage. This is a part of RESPA:

Mortgage loan means any federally related mortgage loan, as that term is defined in § 1024.2 subject to the exemptions in § 1024.5(b), but does not include open-end lines of credit (home equity plans).

Thank you.