New Servicing Guidelines for Delinquent Borrowers
This Friday, new rules go into effect for mortgage servicers. Here’s what you should know:
1) If a borrower defaults, the servicer must contact them within 36 days. The servicer must contact the borrower after every missed payment thereafter. At least once every six months, the servicer must contact the borrower in writing.
2) By the 45th day after borrower defaults, the servicer must give the borrower a written list of possible loss mitigation options. By the time the servicer sends this notice, a specific person must be assigned to the borrower’s file.
3) In the event a borrower submits a loss mitigation application 45 days or more before the foreclosure date, the bank has only five days in which to respond and notify the borrower if there are any missing documents, or if the application is complete. If there are missing documents, the bank must allow at least 7 days for the borrower to submit them. If a completed application is in place at least 37 days before the foreclosure sale date, the servicer must evaluate the file within 30 days and provide a decision. If the borrower is denied, an explanation must be provided.
4) As long as the completed loss mitigation application was submitted at least 90 days before the foreclosure sale date, the borrower may appeal the servicer’s decision.
Generally, small servicers are exempt from these new rules. Additionally, if the borrower is in bankruptcy, the servicer is exempted from these new requirements as well.