In January 2013, the Consumer Financial Protection Bureau issued several new rules governing mortgage servicers consideration of a borrower's application for loss mitigation which rules became effective on January 10, 2014. Any borrower that is more than 37 days from a foreclosure sale on January 10, 2014 and files a complete loss mitigation application at least 37 days before a foreclosure sale is entitled to an evaluation of the complete loss mitigation application for all available loss mitigation options.
Importantly, these new rules provide for a second loss mitigation application review in the case of a change of servicer. Therefore, if you have submitted an application for loss mitigation (i.e.. a loan modification) and there is a change of servicer, the borrower is entitled to a complete review for a new application for loss mitigation made with the new servicer.
The new rules also provide for an appeal process if an application for a loan modification has been denied. The appeal must be taken within 14 days after the loan modification has been denied and must be conducted by personnel at the servicer who were not responsible for evaluating the loss mitigation application initially. Within 30 days from the filing of the appeal, the servicer must give the borrower in writing whether it will be offering a loan modification or confirming the denial of the application.
The new rules have restrictions on when a servicer can file an action for foreclosure. In the new rules, a servicer must now wait until the borrower is delinquent by 120 days before taking the first action toward the filing of a mortgage foreclosure complaint. Additionally, a servicer cannot file an action for foreclosure if the borrower has submitted a complete loss mitigation package for consideration and a decision has not been issued by the servicer. Furthermore, the servicer cannot file an action for foreclosure if the borrower is making payments under a short term forebearance agreement or under a trial modification plan.
If the servicer receives a complete loss mitigation package after a foreclosure action has been filed and at least 37 days before a foreclosure sale, the servicer must promptly instruct its lawyers not to proceed to obtain a foreclosure judgment or to conduct a foreclosure sale until the servicer has made a decision on the loan modification application and the borrower is given a full 14 days to accept or reject the offer.
Thus, if you have given up on obtaining a mortgage modification to save your home, these new rules may provide some hope for a second chance at doing so.
The full text of the CFPB's rules can be found at consumerfinance.gov