No one wants to fall behind on their mortgage payments. In addition to the stress and embarrassment that comes along with missed payments, you also have to worry about losing your home. If you are unable to make your mortgage payments for a long enough period, your mortgage lender can begin the foreclosure process and ultimately sell your house to recoup your outstanding mortgage debt.
Foreclosure is a legal process that is often long, complicated and different from state to state. The laws in your state of residence determine the exact procedures involved in your foreclosure. However, there are federal laws and regulations in place designed to ensure that foreclosures are handled in a fair and reasonable manner. We’ve given an overview of some of those laws and regulations below.
Even though there are federal regulations in place regarding foreclosure, you will need to check your state laws regarding the particulars of your specific foreclosure process. If you need to find state-specific rules, here is a good place to start your search.
Minimum Mortgage Servicing Standards
The Office of the Comptroller of the Currency (OCCC) issued this regulation in April 2013. The goal is to protect homeowners facing foreclosure by requiring mortgage servicers to meet certain requirements prior to selling a home as a foreclosure.
These standards were enacted because of widespread mortgage servicing errors during the mortgage crisis of the late 2000s. Errors included the signing of foreclosure documents without knowing if the information in the documents was accurate. This is known as robo-signing and led to a number of people being notified of foreclosure proceedings when they should not have been.
The new regulations also require mortgage servicers to consider 13 questions before a foreclosure sale can take place, including:
- Is the default status accurate?
- Does the servicer have legal documents giving them the right to foreclose on a property?
- Has the foreclosure notice and other required documents been delivered in a timely fashion?
- Is the homeowner in an active bankruptcy? If so, does the mortgage servicer have the legal rights to foreclose?
- Was the borrower offered or asked if they wanted to a loss mitigation option?
- If a loan modification application was completed, was it reviewed according to regulations?
- Was the borrower notified of the loan modification decision?
Additionally, these new standards protect homeowners by:
- Ensuring they receive, at minimum, a pre-foreclosure sale review
- Requiring that any loan modification application is properly considered
Dual Tracking Prohibition
Dual tracking happens when a mortgage servicer continues foreclosure proceedings at the same time they are considering the borrower’s loan modification application. Dual tracking was a common practice prior to rules preventing it being established by the Consumer Financial Protection Bureau (CFPB). The new regulations went into effect on January 10, 2014.
The new requirements state:
- Foreclosure cannot be initiated until 120 days after a borrow has fallen behind in their payments
- Servicer cannot initiate the foreclosure process while a loss mitigation application is open
- If a complete loss mitigation application is submitted after foreclosure initiation, but more than 37 days before the scheduled foreclosure sale, the foreclosure process must stop until
- Loss mitigation has been denied
- Borrow rejects the workout option offered by the servicer
- Borrower agrees to a workout option but fails to comply with those terms
The Dodd-Frank Act was a result of the mortgage crisis in the late 2000s. So many borrowers were facing financial difficulties that foreclosures skyrocketed. Mortgage service providers were overwhelmed and couldn’t keep up with the need for information and assistance from borrowers. Their inability to stay on top of things during the crisis led to numerous servicing errors that should have been easily avoided or caught.
The Act requires servicers to follow a number of rules, including:
- Send a monthly mortgage statement to the borrower detailing payment information and how payments are applied
- Notices of any interest-rate adjustments
- Prompt crediting of mortgage payments
- Respond to payoff requests with an accurate payoff balance within seven business days of receiving a written request
- Resolve errors and respond to information requests within 30 days
- Inform borrowers of mortgage workout options, if there are any, within 45 days of the borrower getting behind on payments
- Mandates foreclosure cannot start prior to the borrower being 120 days late on payment
The financial collapse of 2008 put the mortgage industry into a tailspin that resulted in unnecessary grief for everyone involved. As a result, the federal government — and many states — created stricter laws, regulations and minimum standards that mortgage servicers are required to follow. These are just a few of the laws that were created on the national level.
Finding out whether a certain property is in foreclosure is relatively simple, it can even be done without leaving your desk chair. With our real estate foreclosure search through million of foreclosures, homes for sale and off market property reports.