NOTICE OF ERROR

A servicer shall comply with the requirements of this section for any written notice from the borrower that asserts an error and that includes the name of the borrower, information that enables the servicer to identify the borrower's mortgage loan account, and the error the borrower believes has occurred. A notice on a payment coupon or other payment form supplied by the servicer need not be treated by the servicer as a notice of error. A qualified written request that asserts an error relating to the servicing of a mortgage loan is a notice of error for purposes of this section, and a servicer must comply with all requirements applicable to a notice of error with respect to such qualified written request.

Under certain conditions, a borrower or the borrower’s agent can stop a foreclosure by sending a notice of error provided the servicer receives the correspondence more than 7 days before a scheduled foreclosure sale. Upon receipt of a notice of error, the servicer must respond prior to the date of a foreclosure sale or within 30 business days after the servicer receives the notice of error, whichever is earlier.

MPA’s Notice of Error letters describe in detail the nature of the mortgage servicing abuses or malfeasance that justify postponing or canceling a foreclosure sale. Due to the thoroughness of our analysis, an MPA Notice of Error can, and has, formed the basis of a lawsuit. Below is a case study that illustrates the power of a properly constructed Notice of Error.

CASE STUDY – Stopping a Foreclosure Sale

On January 30, 2020, our Massachusetts Client contacted us because he had received a foreclosure notice from an attorney’s office. The foreclosure auction was scheduled for 12:00 noon on February 18, 2020.

We recommended that the Client engage MPA to send out a Notice of Error (“NOE”) letter to the mortgage loan servicer, the Client agreed and advanced a retainer.

On February 13, 2020, we sent the NOE to the mortgage loan servicer via U.S.P.S. Certified Mail Return Receipt Requested and faxed a copy to the foreclosing attorney’s office. In our NOE, we described the error as follows:

This Notice of Error is to inform you that there are fatal defects in the foreclosure related paperwork that cannot be cured. Consequently, should your attorney proceed with the foreclosure, it will do so in violation of paragraph 22 of the subject Mortgage as well as numerous state and federal consumer protection statutes, Massachusetts decisional case law, recording statutes, and a Court Order issued by The Honorable Kenneth J. Fishman on June 10, 2016, subrogating the subject Mortgage to a first and second mortgage granted by the Borrowers to Ohio Savings Bank on July 21, 2000.

On February 18, 2020 (approximately two and a half hours before the auction was set to start), the foreclosing attorney called MPA to say that the foreclosure was postponed for at least 30 days to allow the servicer time to review our correspondence and research the facts.

The foreclosure sale was postponed several more times because of the Notice of Error and, due to COVID-19 restrictions was further delayed.

As of this writing (Nov. 2021), the law firm representing the servicer has not reinstituted a foreclosure action.

Frequently Asked Questions:

1. What type of loan servicing errors does MPA address in its Notice of Error letters?

Answer: The regulations identify eleven categories of covered errors as described below.

Pursuant to 12 C.F.R. § 1024.35(b), Scope of error resolution, for purposes of this section, the term “error” refers to the following categories of covered errors:

• Failure to accept a payment that conforms to the servicer’s written requirements for the borrower to follow in making payments.
• Failure to apply an accepted payment to principal, interest, escrow, or other charges under the terms of the mortgage loan and applicable law.
• Failure to credit a payment to a borrower’s mortgage loan account as of the date of receipt in violation of 12 CFR 1026.36(c)(1).
• Failure to pay taxes, insurance premiums, or other charges, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay, in a timely manner as required by § 1024.34(a), or to refund an escrow account balance as required by § 1024.34(b).
• Imposition of a fee or charge that the servicer lacks a reasonable basis to impose upon the borrower.
• Failure to provide an accurate payoff balance amount upon a borrower’s request in violation of section 12 CFR 1026.36(c)(3).
• Failure to provide accurate information to a borrower regarding loss mitigation options and foreclosure as required by § 1024.39.
• Failure to transfer accurately and timely information relating to the servicing of a borrower’s mortgage loan account to a transferee servicer.
• Making the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process in violation of § 1024.41(f) or (j).
• Moving for foreclosure judgment or order of sale or conducting a foreclosure sale in violation of § 1024.41(g) or (j).
• Any other error relating to the servicing of a borrower’s mortgage loan.

2. How can I use a Notice of Error to stop a foreclosure sale?

Answer: Notices of error that fall under categories nine (#9), ten (#10), and possibly eleven (#11) will stop a foreclosure sale providing that the servicer receives the correspondence more than 7 days before a scheduled foreclosure sale. Upon receipt of a notice of error, the servicer must respond prior to the date of a foreclosure sale or within 30 business days after the servicer receives the notice of error, whichever is earlier.

3. How much does it cost to send a Notice of Error?

Answer: Our Notice of Error process is a customized expert service that cannot be priced in advance because it depends upon the complexity of the situation and the availability of documents and data necessary to conduct the investigation. Please call our office for an estimate.