Making a case for the CFPB to clarify how a “rolling delinquency” triggers the 120-day delinquency period required before a mortgage servicer can begin foreclosure, ABA shared survey data with the bureau showing that these delinquencies are not uncommon and that the industry handles them in different ways.
ABA’s survey showed that rolling delinquencies are more prevalent among banks servicing mortgages in their own portfolio. At 43% of these banks, more than one-fifth of delinquent loans are rolling; at 7% of these lenders, more than four-fifths are rolling. Only 21% of banks servicing loans for investors have more than one-fifth of their delinquencies rolling.
A rolling delinquency takes place when a delinquent borrower resumes making some payments but never becomes current on the loan. The CFPB’s servicing rule is unclear about how these resumed payments change the 120-day calculation, and — because of a borrower’s right to sue under the servicing rule — ABA has asked repeatedly for official guidance beyond the bureau’s informal advice to consult industry best practices and local law.
There is no clear uniform practice for handling rolling delinquencies. Approximately half of banks always accept partial payments; the other half either do not accept partial payments at all unless the loan can be made current or accept them only under certain circumstances. Banks also vary in when they begin foreclosure on a rolling delinquency.
View the survey results.
Read ABA’s letter to the CFPB.