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In 2010, the federal government passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which gave the Consumer Financial Protection Bureau (CFPB) the authority to create new mortgage servicing rules. The CFPB's final mortgage servicing rules were implemented under the Real Estate Settlement Procedures Act (RESPA), also known as Regulation X, and the Truth in Lending Act (TILA), known as Regulation Z.
These rules, which went into effect on January 10, 2014, created established national mortgage servicing standards and imposed new foreclosure requirements for lenders and servicers.
Under federal law, a servicer can't make the first notice or filing required under applicable law for any judicial or nonjudicial foreclosure until the mortgage loan obligation is more than 120 days delinquent.
Borrowers become "delinquent" starting on the date that a periodic payment sufficient to cover principal, interest, and, if applicable, escrow becomes due and unpaid until the time when no periodic payment is due and unpaid.
Example. So, suppose your mortgage payment is due on January 1, but you don't send a payment to the servicer. You're one day delinquent on January 2, even if you get a grace period under the terms of your loan agreement. On January 31, you're 30 days delinquent, and so on. After 120 days of delinquency, the servicer may begin the foreclosure.
In a judicial foreclosure, the first filing is the earliest document the servicer files with a court, like a complaint, petition, order to docket, or notice of hearing .
In a nonjudicial foreclosure, the first notice is the initial document a servicer records or publishes as part of the foreclosure process.
If your state's foreclosure laws don't require a court filing, or a recorded or published document, as part of the foreclosure process, the first notice is the earliest document that establishes, sets, or schedules a date for a foreclosure sale.
The 120-day foreclosure restriction also generally applies in the case of a non-payment-related breach of the mortgage.
In addition to requiring a borrower to make payments to repay a loan, most mortgage contracts require the borrower to do certain things, like pay property taxes if the loan isn't escrowed. Mortgage contracts also require the borrower to refrain from doing certain things, like allowing the property to deteriorate or committing waste.
Example. Suppose your mortgage contract requires you to keep the home in a habitable condition. Also, your mortgage contract and applicable law allow a servicer to accelerate (call due) the mortgage loan due if you fail to maintain the home in good condition. Say you let the home fall into disrepair, and the property becomes uninhabitable. The servicer then accelerates the loan and requires you to pay the full mortgage debt balance on July 1. If you don't pay off the loan by this deadline, you'll be one day delinquent on July 2. After 120 days of delinquency, the servicer may foreclose.
Other nonmonetary breaches include failing to maintain homeowners' insurance, violating the law while on the property, and not occupying the home when the mortgage requires it.
Consider talking to a foreclosure attorney if your mortgage servicer has violated the 120-day rule.
To get information about ways to avoid a foreclosure, like by getting a mortgage modification, consider talking to a HUD-approved housing counselor.
For more information about the federal mortgage servicing rules, including the 120-day rule, go to the CFPB website. Search for "mortgage servicing rules."