Mortgage Default Toolbox
A mortgage payment is considered delinquent when a scheduled full payment is not made on or before the due date. The following material provides guidance on how to help your borrowers keep current and assist if they fall behind.
Communication with Your Borrowers
As you work with your borrowers, especially those who may become past due, remember communication is key! It is important to let your borrowers know you are there to help at every opportunity, whether it is face to face, over the phone or in writing.
Delinquent Loan Prevention
Payments are due on the first day of the month and should be considered late on day two. It is best practice to assign individuals on your team to monitor all loan payment activity and proactively reach out to those borrowers who have not made their payment by the Late Charge Date. After the fifteen (15) day grace period has expired, these outreach efforts (both verbal and in writing) need to be increased until a Quality Right Party Contact (QRPC) is made and/or payment is received.
If contact with the borrower is made, inquire as to why they were not able to make a timely payment. The explanation received may be a predictor of future issues and provide an opportunity to help prevent them. Automatic payment withdrawals could be beneficial.
Delinquent Loan Outreach Timeline
If attempts to contact the borrower remain unsuccessful and/or the loan becomes more than thirty (30) days past due, you should have calendared “pleasantly persistent” outreach efforts (by phone and in writing) in place with the goal of speaking to a QRPC. Below is a high-level overview of specific dates which require action by the Servicer. For additional requirements, please reference the CFPB and individual state guidelines.
By Day 36
A good faith effort must have been made to establish live contact with the borrower(s) to determine cause of delinquency and inform them of the available loss mitigation options. After day 36, efforts must continue no less than every seven days until certain outcomes are achieved. For more information, go to the MPF Traditional Servicing Guide Section 8.3.2, Contacting Borrowers.
By Day 45
The borrower(s) must have been provided with written notice of information about loss mitigation options and assigned a single point of contact within your institution. A Borrower Response Package (BRP) should be provided for the borrower(s) to complete and return to the Servicer to determine available loss mitigation options.
By Day 75
The breach/acceleration letter must be sent to the borrower(s).
Before 90 and Prior to Day 120
A property inspection must be completed. For more information, go to the MPF Traditional Servicing Guide, Section 8.3.5 Property Inspections.
On Day 120
Refer to your attorney to initiate foreclosure and continue outreach to discuss reinstatement or liquidation loss mitigation options.
Remember, this is simply a high-level overview of the delinquency timeline. Reference the MPF Servicing Guide, Chapter 8, for detailed information.
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Loss Mitigation Options
Depending upon the degree of delinquency, ability to bring the account current and desire to remain in the property, there are different options available to the borrower(s) including:
- Reinstatement
- Repayment Plan
- Forbearance
- Temporary Modification
- Short Sale
- Deed-in-Lieu of Foreclosure
If addressed early enough in the process, options such as a repayment plan or a forbearance can be put into place. For additional information, you can reference Section 8.5 – Loss Mitigation in the MPF Servicing Guide.
If needed, you can reference the Fannie Mae Servicing Guide to obtain sample loss mitigation evaluation notices to assist in your communications with your borrower(s).
Exhibit B Reporting
Remember, all loans with one payment or more not being made as of the last day of the preceding month or in bankruptcy status must be reported on Exhibit B with the required and most accurate Status and Reason Codes. For additional information, reference the Delinquent Mortgage & Bankruptcy Status Report (Exhibit B) Reference Guide.