New Mortgage Servicing Rules are in effect which will be slowing down foreclosures.  This may be old news to some but when talking about having to follow rules, news moves slowly.  Two new changes in Regulation X took effect in January.  (Section 1024.38) sets out general servicing policies and procedures for mortgage servicers (most people just say “my mortgage co”).  Reg. X requires servicers of loans to have policies and procedures in place to provide accurate and timely information to borrowers, properly evaluating loss mitigation applications.  (Section 1024.41) sets out loss mitigation procedures.

The CFPB (Consumer Financial Protection Bureau) rules protect consumers from risky mortgage servicing business practices.  These rules modify Regulation Z of the Truth in Lending Act (TILA) and Regulation X of the Real Estate Settlement Procedures Act (RESPA) dealing with the procedures for various servicing of loans.

Servicers are required to acknowledge the receipt of a loss mitigation application within 5 business days if received 45 days or more before foreclosure.  If a complete application is received more than 37 days before a scheduled foreclosure sale, the servicer is required to evaluate the borrower within 30 days for all loss mitigation options and notify the borrower of any loss mitigation offers.  All of this will be slowing down foreclosures.

Of significance is the rule’s prohibition of making the “first notice or filing” required by law for any foreclosure process until the loan is more than 120 days delinquent.  If the borrower submits a complete loss mitigation application during that time, the servicer cannot initiate foreclosure until the loss mitigation process is exhausted.  If foreclosure has started and the application is received, the servicer cannot move for judgment or conduct a foreclosure sale until the loss mitigation process is exhausted.

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