Breach letter
A breach letter is the servicer's written notice that a mortgage is in default, giving the borrower an opportunity to cure before the loan is accelerated.
It is usually the last point at which the situation is cheap to fix, and it is routinely filed unopened.
What it says#
Broadly four things, in a form the mortgage documents require.
What the default is — typically the missed payments, itemised.
What must be paid to cure it.
By when — a stated deadline, commonly measured in days from the letter.
What happens otherwise — acceleration of the whole balance and commencement of foreclosure.
Why it is the important letter#
Because of what the figures look like on either side of it.
Before acceleration and referral to counsel, the amount to cure is the arrears plus modest costs.
After referral, legal fees attach to the reinstatement figure and keep accumulating. The same default becomes materially more expensive to cure, and it keeps getting more expensive every week.
The breach letter marks that boundary, and it comes with a date on it.
What to do with one#
Do not ignore the deadline, even if the amount is unaffordable.
Contact the servicer before it expires and say so. A borrower who engages before acceleration has access to the full range of loss mitigation options — a repayment plan, forbearance, a modification — and is dealing with a smaller number.
Contact a HUD-approved housing counsellor, which costs nothing. In Minnesota that routes through the Minnesota Homeownership Center. Counsellors know which options a given servicer actually approves and complete applications properly, which matters because incomplete documentation is the leading cause of denial.
Keep the letter. It establishes what was demanded and when, which matters if the process is later challenged.
Defects#
Most mortgages require notice in a specified form before the lender may accelerate.
A breach letter that fails to comply — wrong amount, insufficient period, missing required content, sent to the wrong address — has been the basis of successful challenges to foreclosures.
Whether a particular defect matters is a legal question and a time-sensitive one. It is worth having a lawyer or counsellor read the letter alongside the mortgage, rather than assuming it was correct because it looked official.
It is not the foreclosure#
Worth ending on, because the letter reads as final and is not.
Nothing has been filed. Nothing is public. No deadline in the statutory process has started. There are still months before a sale and several exits before then.
The letter is a warning, and warnings are only useful to people who read them.