Loan servicing and loss mitigation
Reg X is a set of clocks. Missing one is the violation.
What goes wrong
Servicing is the most enforcement-dense corner of consumer lending, and almost none of it is a judgement call. Reg X is a set of deadlines: acknowledge within five business days, evaluate within thirty, do not refer to foreclosure before 120 days, do not refer at all while a complete loss mitigation application is pending.
That last one -- dual tracking -- is the control that ends up in consent orders. It is also precisely the control an automated workflow breaks, because the foreclosure pipeline and the loss mitigation queue are usually different systems that each believe they are correct. An agent orchestrating across them will happily advance both.
None of this requires a model. It requires arithmetic over dates, applied without exception, and a record afterwards showing which deadline was checked and what it was measured against.
Who runs this today
- Mortgage servicers automating loss-mitigation intake, completeness review and borrower correspondence.
- Default-servicing teams routing files between retention and liquidation workstreams.
- Sub-servicers who carry the regulatory obligation but not the system of record.
Which controls apply
6 rules ship with the LOAN_SERVICING template. Every
threshold is a number from a published rule, so a model-risk reviewer can
read the value and open the CFR rather than asking how it was fitted.
None of these rules decides credit.
| Control | Authority | Verdict |
|---|---|---|
| No Foreclosure Referral While Loss Mit Pending The dual-tracking prohibition. Reg X forbids making the first foreclosure notice or filing while a complete loss mitigation application is pending. This is the single most consequential servicing control and the most common enforcement finding. | Reg X 12 CFR 1024.41(f)(2) | BLOCK |
| 120 Days Delinquent Before First Foreclosure Notice Reg X bars the first foreclosure notice or filing until the borrower is more than 120 days delinquent. | Reg X 12 CFR 1024.41(f)(1) | BLOCK |
| Loss Mitigation Acknowledged Within 5 Business Days Reg X requires written acknowledgement of a loss mitigation application within five business days, stating whether it is complete. | Reg X 12 CFR 1024.41(b)(2)(i)(B) | ESCALATE |
| Complete Loss Mit Application Evaluated Within 30 Days Reg X requires evaluation for all available loss mitigation options within 30 days of a complete application. | Reg X 12 CFR 1024.41(c)(1) | ESCALATE |
| Conforming Payment Credited Same Day Reg Z requires a conforming payment to be credited as of the day of receipt. Delay manufactures late fees and delinquency that then drive default servicing. | Reg Z 12 CFR 1026.36(c)(1)(i) | BLOCK |
| 45 Days Notice Before Force-Placed Insurance Charge Reg X requires written notice at least 45 days before charging a borrower for force-placed insurance. | Reg X 12 CFR 1024.37(c)(1)(i) | BLOCK |
What the evidence looks like
The sample below is a real BLOCK on dual tracking: a foreclosure referral while a complete loss mitigation application was pending. The reason names the prohibition and the CFR section, which is what an examiner reading the file months later needs.
Sample evidence bundle
A real bundle from this template, exported through the same endpoint a customer would use. It carries the decision, the failed rules with their reasons, and the hash-chained audit events. You can verify it yourself without installing anything from us — the verifier is standalone and imports nothing from Sentinel.
A sensible pilot
The other three
The same gate governs all of them. Start where a wrong answer is recoverable, and move to credit decisioning when the evidence earns it.
Start in shadow mode
We are taking three design partners. Every deployment starts in OBSERVE, which evaluates everything and enforces nothing, so the first month costs you a report rather than a risk.
See the programme