Are There Any Special Rules for Servicers When Dealing with Delinquent Borrowers?

Yes. Once you miss a mortgage payment on the home you live in, federal rules require your servicer to try to reach you by the 36th day, send a written notice of your options by the 45th day, and give you staff who can answer questions about them. If you send a complete application for help, the servicer generally must decide it within 30 days, and it cannot make the first foreclosure notice or filing until you are more than 120 days behind. These rules come from the Consumer Financial Protection Bureau's (CFPB) Regulation X and apply to most servicers, with a narrower set for small servicers.

When does the delinquency clock start?

A servicer is the company that collects your payment and handles your account; what loan servicing is explains its full role. Under the rules, you are delinquent from the day a full monthly payment (principal, interest, and escrow if you have it) is due and unpaid. You stay delinquent until no payment is past due.

The day counts below run from that due date, not from the end of any grace period for late fees. The CFPB's own example: if your January 1 payment is unpaid, the servicer must try to reach you by February 6. The written notice described below would then be due by February 15.

The day-36, day-45, and loss mitigation rules apply only to a loan on your principal residence. Loss mitigation means an alternative to foreclosure, such as a loan modification, forbearance (a temporary pause or reduction in payments), a repayment plan, or a short sale, that the loan's owner makes available through the servicer.

What must the servicer do in the first 45 days?

The servicer does not have to send the written notice more than once in any 180-day period, so if you stay behind you may not get a new letter every month. If you are in bankruptcy, or have sent the servicer a written request under the Fair Debt Collection Practices Act to stop contacting you, the phone-contact rule does not apply and the written notice rules change.

What can your assigned contact do?

The assigned staff must be able to tell you which loss mitigation options the loan's owner offers, what you must do to be evaluated, the status of any application you sent, any deadlines, and when the servicer may refer your loan to foreclosure. They must be able to pull your payment history and the documents you sent, including ones you gave a prior servicer, and pass them to whoever evaluates your application. They must also tell you how to send a written notice of error or request for information, which starts its own deadlines; the rules for written communication explain how.

This access lasts until you make two consecutive on-time payments under a permanent loss mitigation agreement, such as a finished loan modification.

How does the application process work?

You can start with a phone call, but the timelines below depend on when the servicer receives a complete application, meaning every document it asks for. If no foreclosure sale is scheduled when your complete application arrives, the rules treat it as received more than 90 days before a sale, so every step below applies.

1. Completeness notice. If the servicer receives your application 45 or more days before a scheduled foreclosure sale, it must tell you within 5 business days whether the application is complete, list any missing documents, and give a reasonable date to send them.
2. Decision. For a complete application received more than 37 days before a sale, the servicer must evaluate you for every option the owner offers and send a written decision within 30 days. A denial of a loan modification must state the specific reasons.
3. Time to accept. If the complete application arrived 90 or more days before a sale, you get at least 14 days to accept or reject an offer. If it arrived fewer than 90 but more than 37 days before, you get at least 7 days.
4. Appeal. If the complete application arrived 90 or more days before a sale, or before the servicer made the first foreclosure filing, you can appeal a loan modification denial within 14 days. Different staff must review it and decide within 30 days.

The servicer does not have to offer any particular option. The loan's owner, such as Fannie Mae, Freddie Mac, or a bank, sets which options exist and who qualifies; for an FHA-insured or VA-guaranteed loan, the FHA or VA program rules shape those options. Even without a complete application, the servicer can offer short-term help, such as forbearance of up to 6 months.

When can foreclosure start?

The servicer cannot make the first notice or filing required to start foreclosure under state law until you are more than 120 days delinquent. The only exceptions are a foreclosure based on a due-on-sale clause (for example, you transferred the home without the servicer's consent) and joining a foreclosure started by another lienholder, such as a second mortgage lender.

After day 120, a complete application still limits what the servicer can do:

• Received before the first filing: no filing until the servicer has denied you and any appeal is over, you reject every offer, or you fail to keep up with an agreement.
• Received after the filing but more than 37 days before a sale: the servicer cannot ask the court for a judgment or order of sale, or hold the sale, under the same conditions.

These protections attach to one complete application. If the servicer already reviewed a complete application and you have stayed behind ever since, it does not have to repeat the process for a new one.

How long foreclosure takes after the filing depends on state law. How many late payments trigger foreclosure covers that timeline.

Do these rules apply to every servicer?

No. A small servicer, one that with its affiliates services 5,000 or fewer mortgage loans and owns or originated all of them, is exempt from the day-36 and day-45 contact rules, the assigned staff rule, and most of the application procedures. It still cannot make the first foreclosure filing until you are more than 120 days delinquent. While you are meeting the terms of a loss mitigation agreement, it also cannot make that first filing, ask the court for a foreclosure judgment or order of sale, or hold a sale. Reverse mortgages are also outside these rules. Federal laws protecting you from mortgage servicers lists which other rules small servicers must follow.

What should you do once you fall behind?

1. Answer the servicer's calls and letters, and write down the name and number of your assigned contact.
2. Send a complete application early. Before day 120, or at least 90 days before any sale date, keeps the most protections, including the appeal right.
3. Keep copies of everything you send and a record of the date the servicer received it.
4. Send a written notice of error if the servicer makes a foreclosure filing, seeks a judgment or order of sale, or moves to hold a sale while one of these protections applies.
5. Get free help from a HUD-approved housing counselor at (800) 569-4287, who can review your application and contact the servicer with you.