Which distressed loan notice is sent to borrowers with unsecured loans?
FCA rules provide for either the nonforeclosure notice or the 45-day notice to be sent when a loan is identified as distressed. However, the type of notice to send to an unsecured distressed loan is problematic because there is no liquidation action (foreclosure) on uncollateralized loans—just the possibility that the qualified lender may pursue deficiency judgment action. In lieu of the 45-day notice we expect qualified lenders to send borrowers with unsecured distressed loans a modified version of the 45-day notice. The notice may be modified to replace the term “foreclosure” with another appropriate term, qualified such as a deficiency judgment, to inform the borrower of the qualified lender’s intention to pursue legal proceedings on the unsecured debt.
