Save Money – Skip The 30 Day Breach

Do servicers want to automatically add 30 days to the collection-foreclosure process no matter what by having to send the usual breach (cure) letter?  Maybe it is not thought about very much because the standard Fannie Mae/Freddie Mac form of mortgage contains a provision mandating a 30 day breach letter as a prerequisite to acceleration and foreclosure.  The clause in the real world means that if the letter is not sent, but a foreclosure is begun nonetheless, the entire action can be dismissed.

So what is our suggestion to skip the letter?  Can we be serious?  Yes, but only in some (important) situations.  Here is the explanation.

First, mortgages other than the uniform Fannie/Freddie instrument will not typically contain a 30 day notice provision.  While the Fannie/Freddie form is commonplace, sometimes servicers do encounter other mortgage forms.  Therefore, suggestion number one is to read the mortgage; become familiar with the versions being used.  If there is no 30 day mandate, move the action along and don’t waste those thirty days.  The breach letter need not be sent.

Second, for loans expected to be held in the servicer’s own portfolio (at least loans not being sold on the secondary market to one of the government sponsored enterprises) excise the  30 day provision.  This is done in one of two ways.  Either create a separate form for the loans to be held, or use the standard form, but annex a rider which removes certain provisions if the loan is not being sold.

All this is easy enough.  Why can it be so meaningful?  The answer is time translating into money.  We have written in the past at length about all the reasons why the mandatory 30 day cure notice provision is unfortunate but we will leave those lengthy explorations to a review of earlier alerts and articles.  Just by way of example, though, here is a recent actual case which highlights the point.

Borrowers are engaged in a nasty matrimonial action which leads to divorce, with ownership of the former marital residence (the mortgaged property) as tenants in common.  The former husband and wife cannot agree on a disposition of the property and part of the battle is that neither is remitting mortgage payments.  Then, one former spouse starts a partition action to force the property to be sold.  The servicer,  absolutely assured by these circumstances that it must foreclose, is hamstrung by the notice provision.  It must wait 30 days more, notwithstanding no chance of a reinstatement.

Even though this mortgage was held by the servicer in its own portfolio, and therefore did not have to contain a 30 day notice provision, the Fannie/Freddie form was used without alteration.  The servicer was unnecessarily stuck with waiting.  Multiply this or a similar scenario across a portfolio of loans and the potential loss is both apparent and serious.  It doesn’t have to be.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.