What is the “first legal” foreclosure action? That depends on the state. It could be a complaint filing, notice of default filing or publication in a newspaper. This means servicers must refer the loan to foreclosure counsel around 90 days after the death. Or, in the case of a non-death default, it is the date HUD approves calling the loan due. This allows counsel time to prepare what is required to achieve the first legal action. What if probate is required? Probate is the legal process of administering a deceased person’s estate, and it must be completed if required in the jurisdiction. Earlier referral to the foreclosure attorney will occur in states where opening probate is required to meet the first legal requirement or where default letters are required to sea- son more than 30 days before foreclosure can be initiated. When do foreclosure fees start accruing to the loan balance? Fees begin to accrue when the loan is referred to foreclosure counsel. Are extensions of foreclosure available? Two 90-day extensions of foreclosure are available to heirs—if they pro- vide proof that they are marketing the property or obtain- ing financing or sourcing other funds to pay the loan off. HUD must approve extension requests, and if approved, the foreclosure proceedings and related fees will be suspended until the expiration date of the extensions. If an extension is not requested and approved before the loan is referred to counsel, foreclosure fees will accrue to the loan until the extension is approved. HUD does not allow any additional or special exten- sions of foreclosure simply to allow time for probate. Heirs must provide evidence that they are working to refinance or pay off the loan in full, sell the property or execute a deed-in-lieu. Probate can be expensive and take time. It can be a few months to years depending on the presence of a will, the size of the estate and the ability to locate beneficiaries, so acting quickly is important. Loan officers should not advise borrowers they will have 12 months to pay off the loan or sell the home. This is not accurate and leads to misunderstandings.
and loan. Will they pay off or refinance the loan and retain the home? Sell the property? A short sale may be available. Or execute a deed-in-lieu of foreclosure? Cash for Keys may also be available. When? State laws determine when the servicer must refer the loan to foreclosure counsel to begin foreclosure proceedings. Servicers must achieve the first legal foreclosure action on or before six months after the last borrower’s death or default.
Servicing Corner continued on page 30
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