What Are the Steps in a Pre-Foreclosure Procedure?

Pre-foreclosure is the period between your first missed payment and the first foreclosure notice or court filing. Federal rules require your servicer, the company that collects your payments, to try to reach you by day 36, send a written notice of your options by day 45, and wait until you are more than 120 days behind before that first filing. The standard Fannie Mae and Freddie Mac mortgage forms add a breach letter that gives you at least 30 days to catch up. Your strongest step is a complete application for help. Received before the first filing, it holds off the filing, and received more than 37 days before a scheduled sale, it holds off the sale, under the conditions explained below.

Step 1: The servicer contacts you (days 36 and 45)

By the 36th day after a missed payment, the servicer must make, or make good-faith efforts to make, live contact with you by phone or in person. Once it reaches you, it must tell you about options to avoid foreclosure when appropriate. It must try again within 36 days after each later due date you miss.

By the 45th day, the servicer must send a written notice that:

• encourages you to contact it;
• gives the phone number for staff assigned to your loan and the servicer's mailing address;
• describes any options it offers, such as repayment plans or loan modifications, and how to apply;
• lists the HUD or CFPB website for finding housing counselors and HUD's toll-free counseling number.

If you stay 45 or more days behind, the servicer must send the written notice again at least every 180 days. Also by day 45, the servicer must assign staff who can tell you which options exist, how to apply and appeal, the status of your application, the date it may refer the loan to foreclosure, and the deadlines that apply.

What to do now: Answer the call or call back, write down the assigned staff contact, and ask for a loss mitigation application, the form and document list for being reviewed for foreclosure alternatives. A HUD-approved housing counselor can help you fill it out at no cost. The CFPB also lists the HOPE Hotline, (888) 995-4673.

Step 2: The breach letter

Under the standard forms, the lender must send a notice of default before it can demand the full balance. The notice must state the default, what you must do to cure it, a cure date at least 30 days after the notice (or the period your state sets), that missing the date may lead to acceleration and sale, your right to reinstate after acceleration, and your right to dispute the default in court. Acceleration means the lender demands the entire unpaid balance at once.

What to do now: If you can pay the past-due amount, fees included, by the cure date, do it, and first ask the servicer for a written quote of the amount needed to bring the loan current. If you cannot, send your application now rather than waiting for the cure date to pass. After acceleration, you can still reinstate by paying the overdue amounts and the lender's costs. Check your own mortgage for the deadline: the 2021 standard forms allow it until the later of 5 days before a foreclosure sale or the deadline set by applicable law, and some older mortgages also end the right when a court enters a foreclosure judgment.

Step 3: Apply for loss mitigation

Loss mitigation options include forbearance (paused or reduced payments for a time), a repayment plan (catching up over several months), a loan modification (a permanent change to the loan's terms, such as its rate or length), a short sale (selling the home for less than you owe, with the lender's approval), and a deed in lieu of foreclosure (signing the home over to the lender), along with state and local help programs. Alternatives to foreclosure compares them.

Federal rules set the servicer's deadlines once you apply:

1. Acknowledgment within 5 business days. If the servicer gets your application 45 days or more before a sale, it must tell you in writing whether the application is complete, list any missing documents, and give a reasonable date to send them.
2. Decision generally within 30 days. For a complete application received more than 37 days before a sale, the servicer must review you for every option available from the loan's owner and send a written decision within 30 days, unless required information from someone other than you or the servicer remains unavailable. The servicer must diligently pursue that information and send a written delay notice within 30 days or promptly afterward identifying what is missing and confirming it has requested it. Once the information arrives, it must promptly finish the review and send its decision.
3. Reasons for a denial. If it denies a trial or permanent loan modification, the notice must give the specific reasons.
4. Time to accept. The servicer must give you at least 14 days to accept or reject an offer if your complete application arrived 90 days or more before a sale, or at least 7 days if it arrived 38 to 89 days before. Missing that deadline can count as rejecting the offer.
5. Appeal. If your complete application arrived 90 days or more before a sale, you can appeal a loan modification denial within 14 days, and the servicer must decide the appeal within 30 days.

If no sale is scheduled when your complete application arrives, the servicer treats it as received more than 90 days before a sale, so all of these protections apply.

How a complete application pauses foreclosure

The block lasts until one of three things happens: the servicer finds you ineligible for every option and any appeal is over, you reject every offer, or you fail to meet the terms of an option you accepted, such as missing a plan payment or not having an approved short sale by the end of the agreed listing period. These blocks require a complete application, so send every missing document by the date the servicer gives you. If you send everything the servicer asked for and it later finds it needs more, it must treat your application as complete until you have had a reasonable chance to supply the rest. If the servicer puts you on a short-term forbearance or repayment plan based on an incomplete application, it cannot make the first foreclosure notice or filing, ask a court for a foreclosure judgment or order of sale, or hold a sale while you make the plan's payments.

Two limits apply. A servicer does not have to repeat these procedures for a new application if it already reviewed a complete application from you and you have stayed behind ever since; catching up between applications restores them. Small servicers, those that service 5,000 or fewer loans, all made or owned by them or an affiliate, are exempt from most of these steps, but they must still wait out the 120 days, and they cannot start a foreclosure or hold a sale while you are making the payments under a loss mitigation agreement.

What happens if pre-foreclosure ends without a solution?

If you are not eligible for an option, or you decline the offers, the servicer will usually start foreclosure after day 120. The first legal step then depends on your state: a lawsuit in a judicial foreclosure state, covered in the steps in a judicial foreclosure, or recorded and mailed notices in a nonjudicial state, covered in the steps in a nonjudicial foreclosure. You can still send a complete application more than 37 days before the sale date to pause the sale. How foreclosure works covers the full process, state timelines, and what happens after the sale, and the servicing rules for delinquent borrowers covers the servicer's other duties.