I'm having a disagreement with our business unit that sends, reviews and processes mortgage loss mitigation applications. The situation: A customer contacts our Collections department and reveals a financial hardship (divorce) and requests a loss mitigation application. They were advised they need to speak with the "Loss Mitigation Department". The Loss Mitigation Department calls and leaves a message, but doesn't connect verbally with the customer for a month, therefore the application isn't sent for a month after the initial request.

In my opinion, since the borrower contacted us and requested an application, we should have sent it immediately, regardless if their department spoke to the borrower. The "Loss Mitigation" department disagrees, saying they don't need to send them until they speak to the customer. What is appropriate in this situation?

I believe you are correct depending upon the timing and your definition of information required in an application,

1024.31 Definitions:

Loss mitigation application means an oral or written request for a loss mitigation option that is accompanied by any information (e.g. financial hardship by way of divorce) required by a servicer for evaluation for a loss mitigation option.

2.Review of loss mitigation application submission.

i.Requirements.
If a servicer receives a loss mitigation application 45 days or more before a foreclosure sale, a servicer shall:

A. Promptly upon receipt of a loss mitigation application, review the loss mitigation application to determine if the loss mitigation application is complete; and

B. Notify the borrower in writing within 5 days (excluding legal public holidays, Saturdays, and Sundays) after receiving the loss mitigation application that the servicer acknowledges receipt of the loss mitigation application and that the servicer has determined that the loss mitigation application is either complete or incomplete. If a loss mitigation application is incomplete, the notice shall state the additional documents and information the borrower must submit to make the loss mitigation application complete and the applicable date pursuant to paragraph (b)(2)(ii) of this section. The notice to the borrower shall include a statement that the borrower should consider contacting servicers of any other mortgage loans secured by the same property to discuss available loss mitigation options.

Edit: Spoke with a colleague and they pointed out some further definitions that add a grey area. See below:

41(b)(1) Complete loss mitigation application.

1.In general.
A servicer has flexibility to establish its own application requirements and to decide the type and amount of information it will require from borrowers applying for loss mitigation options.

2.When an inquiry or prequalification request becomes an application.
A servicer is encouraged to provide borrowers with information about loss mitigation programs. If in giving information to the borrower, the borrower expresses an interest in applying for a loss mitigation option and provides information the servicer would evaluate in connection with a loss mitigation application, the borrower's inquiry or prequalification request has become a loss mitigation application. A loss mitigation application is considered expansively and includes any “prequalification” for a loss mitigation option. For example, if a borrower requests that a servicer determine if the borrower is “prequalified” for a loss mitigation program by evaluating the borrower against preliminary criteria to determine eligibility for a loss mitigation option, the request constitutes a loss mitigation application.

3.Examples of inquiries that are not applications.

The following examples illustrate situations in which only an inquiry has taken place and no loss mitigation application has been submitted:

i. A borrower calls to ask about loss mitigation options and servicer personnel explain the loss mitigation options available to the borrower and the criteria for determining the borrower's eligibility for any such loss mitigation option. The borrower does not, however, provide any information that a servicer would consider for evaluating a loss mitigation application.


ii. A borrower calls to ask about the process for applying for a loss mitigation option but the borrower does not provide any information that a servicer would consider for evaluating a loss mitigation application.