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64 five-day acknowledgement letter to the borrower communicating whether or not the application is complete. If the application is incomplete, the letter must list all of the missing documentation still required and provide the deadline for submission of the remaining documentation. e definition of a loss mitigation option is intentionally broad and covers both retention and liquidation options. Collection strategies such as short-term forbearance programs are also considered to be loss mitigation options under CFPB rules. Borrower Communication: Borrower communication plays a critical role in the loss mitigation process. CFPB rules about continuity of contact also prescribe certain responsibilities of servicing personnel assigned to assist borrowers and provide loss mitigation options. During the process of assessing the loss mitigation application, servicers are expected to have various borrower touch-points. Other than the five-day acknowledgement letter, servicers must be prepared to demonstrate that "reasonable diligence" has been performed to evaluate a borrower's application. is involves tracking progress against deadlines communicated to borrowers. e amount of diligence will depend on borrower needs, as short-term forbearance options may quickly be deployed but may not be appropriate under all circumstances. In the event that a short-term forbearance program is offered to the borrower, servicers do not need to wait to receive a completed application package. However, the information offering the borrower the option to apply for long- term loss mitigation programs still needs to be incorporated into the five-day acknowledgement letter that is sent. Imminent Default: A borrower who is current or has only one payment due and unpaid by the end of the month in which the payment is due, and who contacts the servicer to request consideration for a loan modification or other foreclosure alternative, must be evaluated to determine if he or she is at risk of imminent default. Borrowers are considered to be at risk of imminent default when they have experienced a change in their life circumstances (i.e., job loss, illness, changes in marital status, etc.) resulting in financial hardship that has or will render them unable to continue making their mortgage payment(s). When making an imminent default determination, servicers must evaluate the borrower's hardship, the condition of and circumstances affecting the property securing the mortgage loan, and as the borrower's financial condition. A borrower's hardship and financial condition must be supported by appropriate documentation. Servicers must document the basis for an imminent default determination and retain such documentation in accordance with established document retention requirements. Reason for Default (RFD): Servicers should promptly identify RFD and record it in the applicable underlying servicing system. Prompt recording of the RFD may assist servicers in presenting borrowers with loss mitigation options that may be suitable to the situation at hand. While CFPB guidelines and standards do not specifically cite the need for determining and recording the RFD, servicers throughout the industry follow specific processes and have written procedures requiring collectors and loss mitigation servicing personnel to identify and record the borrower's RFD. Loss Mitigation Decisions: CFPB rules require servicers to decide on a loss mitigation action within 30 days of receipt of a completed application package. Whatever the outcome, servicers must send written notice to borrowers that must include decisions regarding options enabling homeownership (such as a loan modification) and liquidation options (such as a short sale). Additionally, for any offers made to borrowers, the servicer is required to provide a due date and procedures that must be followed (by the borrower) when responding to an offer of a loss mitigation option. e CFPB clarifies that liquidation options may be offered on a conditional basis, pending full property valuation. However, servicers will likely need to use net present value (NPV) tools to forecast liquidation options within investor eligibility rules. If borrowers are denied for a loan modification or for any other loss mitigation options that are offered, the servicer must provide an explanation of the reasons for denial along with any inputs used in the NPV calculation (to the extent such inputs were the basis for the denial). ese notices must also inform borrowers of their right to appeal a loan modification denial decision, as well as the procedures to follow and deadlines for doing so. Dual Tracking: e CFPB has developed guidelines and standards (known as dual tracking guidelines) preventing servicers from referring borrowers to foreclosure while simultaneously evaluating loss mitigation options. Such provisions have been deemed necessary by the CFPB to achieve consumer protection offered under the Real Estate Settlement Procedures Act (RESPA), including assurance that consumers in all jurisdictions have an opportunity to submit a complete loss mitigation package and avoid harms that may result from dual tracking. Foreclosure Processing: Servicers are prohibited from making the first notice of foreclosure filing prior to a borrower falling 120 days delinquent. Borrowers who submit a completed application for a loss mitigation option before the servicer has made the first notice or filing as required by applicable law to begin the foreclosure process (even if the borrower is more than 120 days delinquent), the servicer is prohibited from initiating the foreclosure process, unless the borrower: (i) is notified by the servicer in writing that they are not eligible for any loss mitigation option (and any right to appeal has been exhausted), (ii) rejects all loss mitigation offers, and (iii) fails to perform under the terms of an agreed-upon loss mitigation option, including a trial modification. Other critical processes relating to loss mitigation alternatives leading to foreclosure include the following: Prohibitions on Foreclosure Sales: For borrowers who submit a completed application for a loss mitigation option after the servicer has initiated a foreclosure process, the servicer is prohibited from proceeding with a foreclosure action or conducting a foreclosure sale unless one of the following three conditions are met: (i) the first order of filing is made under applicable law, (ii) a foreclosure sale has been conducted, or (iii) more than 37 days have elapsed prior to proceeding with the foreclosure sale. Servicers are responsible for promptly instructing foreclosure counsel not to proceed with foreclosure filings or to conduct foreclosure sales. As applicable, servicers must take reasonable steps to avoid a ruling on a previously filed dispositive motion. Receipt of a Loss Mitigation Application: Servicers must have established processes and protocols in place to ensure that for borrowers submitting an application for pursuit of a loss mitigation option 45 days or more before a scheduled foreclosure sale, a complete review is performed and additional documentation is requested (as required). In addition, borrowers must be advised that documents must be received by the earlier of: (i) the 120th day of delinquency, (ii) the 90th day before a foreclosure sale, or (iii) by the 38th day before the scheduled foreclosure sale date. Evaluation of a Loss Mitigation Application: Servicers must have established processes and protocols in place to ensure that for applications received 37 days before a scheduled foreclosure sale, borrower evaluations are completed within 30 days and the borrower is notified in writing of their eligibility and related options. e servicer's evaluation must include options that enable homeownership retention (such as a loan

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