The mortgage crisis of a few years ago, a financial nightmare that led to a much larger financial crisis in the United States, has led to changes to federal foreclosure laws that took effect in January 2014. The new laws are designed to protect homeowners who fall behind in their mortgage or who are facing financial hardship that could lead them to foreclosure.
Mortgage Servicer Requirements
Many mortgage companies use mortgage servicers to collect monthly payments from consumers, and these servicers are often charged with the responsibility of tracking account balances, managing escrow and pursuing foreclosure should a borrower fall behind in payments. During the mortgage crisis, many mortgage servicers had difficulty keeping up with the increased demand for assistance, and this resulted in many errors, some of which were significant. In order to address these problems, the federal government instituted new requirements in order to protect consumers. Among these changes is a requirement that a servicer provide options to help a homeowner avoid foreclosure. Effective January 2014, the servicer must contact the borrower and provide information about workout options available within 45 days after a payment is missed. Personnel must be assigned to the borrower to assist them by phone once the borrower is 45 days delinquent and that personnel must be available by phone.
Dual Tracking Restrictions
Another change to foreclosure for 2014 is rules regarding dual tracking, the practice of evaluating a borrower for loan modification while, at the same time, proceeding with foreclosure procedures. Beginning in 2014, servicers may not start foreclosure proceedings until a homeowner has fallen at least 120 days (four months) behind to allow the borrower time to file for loss mitigation. If the borrower fails to file the application, foreclosure may begin, but if an application is submitted after foreclosure begins, the servicer may be restricted from continuing the foreclosure unless they have notified the borrower:
•That they are not eligible for loss mitigation or all appeals have been exhausted;
•The borrower rejects loss mitigation offers; or
•The borrower fails to comply with the loss mitigation terms.
Restrictions After Help Is Requested
Once a borrower has completed a loss mitigation application, and it is received by the servicer more than 37 days prior to a foreclosure sale, a judgment may not be obtained, nor can a sale be conducted until one of the three conditions above have been met. As long as the loss mitigation application was received 90 days or more prior to a scheduled foreclosure sale, the borrower may appeal any loss mitigation denial.
These new regulations are designed to help consumers who are experiencing difficulty paying mortgage payments. If you would like more information or need legal advice on dealing with foreclosure, you are invited to call Litvin Law Firm at 888-964-3367.