For a mortgage covered by Regulation X's preforeclosure review rule, a borrower has missed payments and no statutory exception applies. When may the servicer make the first notice or filing required by applicable law to begin foreclosure?
Correct Answer
D) Only after the loan is more than 120 days delinquent, subject to other applicable restrictions
D. The ordinary rule requires delinquency beyond 120 days before the first required notice or filing. The restriction concerns the legally required first foreclosure step, not simply an internal decision to refer a file. More than 120 days is not the same as reaching day 120. Scope and exceptions: Due-on-sale violations and joining another lienholder's foreclosure are specified exceptions excluded here. Loss-mitigation protections or other applicable law may postpone action further; passing the delinquency threshold is not unconditional permission to foreclose. Source: Section 1024.41(f)(1)–(2) and commentary — https://www.consumerfinance.gov/rules-policy/regulations/1024/41/
Why This Is the Correct Answer
D. The ordinary rule requires delinquency beyond 120 days before the first required notice or filing. The restriction concerns the legally required first foreclosure step, not simply an internal decision to refer a file. More than 120 days is not the same as reaching day 120. Scope and exceptions: Due-on-sale violations and joining another lienholder's foreclosure are specified exceptions excluded here. Loss-mitigation protections or other applicable law may postpone action further; passing the delinquency threshold is not unconditional permission to foreclose.
Why the Other Options Are Wrong
Option A: After the second missed payment whenever the note allows it
A contractual remedy does not override the federal restriction.
Option B: As soon as the loan is 90 days delinquent
Ninety days is too early under the stated ordinary rule.
Option C: Only after 180 days delinquent in every case
There is no universal 180-day period in this provision.
Exam Tip
Distinguish the minimum preforeclosure threshold from permission to proceed in a particular case.
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