What is the 120 day foreclosure rule under RESPA?
“What is the 120 day foreclosure rule under RESPA?”
What is RESPA?
RESPA is a federal law that has been around a long time but was recently changed in 2014 to give homeowners protection against a lot of the abusive mortgage practices. This includes:
- So called “dual tracking” where a foreclosure happens while you are in the loss mitigation process
- Allows you to send notice of error or request for information letters
- 120 rule on foreclosures
How do you figure up the 120 day rule against foreclosures?
We look at how far behind you are on your mortgage. Let’s say you are 90 days.
Then there cannot be a foreclosure as you must be 120 days late for a foreclosure to happen.
And actually it is 120 days late before the mortgage company can advertise in the newspaper to foreclose against you.
Let’s talk about how foreclosures work in Alabama so this will make sense.
Alabama is a non judicial state and to set a foreclosure, there must be 3 weeks of newspaper advertisement in your county
There is no lawsuit filed to do a foreclosure. Instead this is the typical process:
- You get a “default letter” telling you that you have broken your agreement with your mortgage company. The letter will also tell you how to fix the default and normally gives you 30 days to do this. (Warning — often your default letter is incorrect and this gives you great options in stopping or reversing the foreclosure).
- If you don’t “cure” or “fix” the default, then you will receive an “acceleration letter” which means the whole loan is due now — or accelerated instead of letting you pay it over the 30 years of your mortgage.
- The acceleration letter will also set a foreclosure date at least 30 days in the future.
- The mortgage company must advertise the foreclosure in a newspaper in your county for at least 3 weeks.
So the 120 day rule says, as a practical matter, that it can’t be advertised in the newspaper until you are at least 120 days late.
(Note: foreclosure lawyers and others may disagree with my interpretation. This is still a relatively new law and not all of the controversies have been decided but the above is my opinion on what this law means.)
How can you learn more about RESPA?
What can you do right now?
You can go to the websites above or call us at 205-879-2447 or fill out our contact form.
We look forward to hearing from you.