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

Yes, there are certain limitations and obligations for servicing companies as they deal with delinquent borrowers. Note that a borrower is delinquent whenever that borrower fails to pay a required mortgage payment on time. Considering that the incentive for servicing companies is to service borrowers with low credit ratings and high default chances, an unregulated servicing market would lead to recurring cases of predatory servicing. In response to this conflict of interests, certain regulations have been put in place to help borrowers who find themselves in a situation of delinquency.

If you are delinquent on your mortgage loan, servicers must make good faith efforts to establish contact with you by the 36th day of your delinquency, and to promptly inform you that loss mitigation options may be available in certain cases. Moreover, servicers must send you a written notice informing you about these loss mitigation options by the 45th day of your delinquency.

Current regulations not only require servicers to establish contact with you in the event of delinquency, but these regulations also force servicers to guide you and to maintain contact with you through this process. Servicers are required to maintain reasonable policies and procedures with respect to providing you with access to assistance personnel in case loss mitigation options are applicable. In practice, this translates to an obligation on service providers to ensure that you will be assigned personnel by either your receipt of written information or the 45th day of your delinquency, whichever is earlier. These personnel should be available to assist you by phone and will give advice on the status of any loss mitigation application and its estimated timeline. Furthermore, they should forward your information to the servicers responsible for evaluating your loss mitigation options, if applicable.