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Originally posted in Compliance Masters Group Forum by mbarnes:
It is our understanding that we should not make the first notice or filing for foreclosure unless the consumer’s loan is more than 120 days delinquent. Does this mean that our attorney cannot send a Demand Letter until the 121st day of delinquency?
An Additional question regarding foreclosure and the 120 day rule…. Our bank attorney is asking this question “Can a bank refuse a monthly payment on a loan more than one month past due to prevent a debtor from avoiding going 120 days past due but at the same time never getting the loan current and therefore being on the past due list until the loan matures?” In his research he has found many consumer and bankruptcy websites already advising debtors not to worry about late payments so long as they don’t go 120 days past due. His fear is this could turn into a major problem and past dues could skyrocket.
Jack Holzknecht’s Response:
Foreclosure is a state law process. If under the law of your state the Demand Letter is the first notice, then it cannot be sent until the consumer is 120 days past due.
If the borrower makes a legal payment (in U.S. Dollars and meets any other requirement you may impose) the bank must accept the payment and credit the payment as of the date of receipt, unless other payment conditions have been established.
It is hard to image this scenario becoming common. Apparently the consumer has the ability to make a monthly payment, but chooses to remain delinquent thereby destroying his or her credit history and paying continuing late charges.
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One of our Tennessee members recently submitted the following questions. Anyone with expertise in TN state law please help us out.
QUESTION: We would like clarification on some State & Federal Foreclosure Regulations to determine if we are following proper procedures for delinquent 1-4 family residential borrowers under the new RESPA Mortgage Servicing Final Rule that was effective January 10. We want to ensure our procedures are current and determine a time-frame for proceedings from first delinquency to foreclosure. We are prohibited from Sending 1st Notice unless the borrower is 120 days delinquent (12 CFR 1024.41 (f)(1)) – We would like to know if this refers to the notice in Tenn. Code Ann. § 35-5-101 and if not, what is the notice being referenced?
Click here for some really detailed guidance on the first notice. It is from the Preamble to the Final RESPA rule (starting on page 88). While it is great guidance it is not state law specific.
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