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Fair Debt Collection: 15.6.1 Description of the Two Torts and State Variants

Malicious prosecution and abuse of process are both torts that apply to wrongful use of judicial or quasi-judicial processes.325 Malicious prosecution is the more widely accepted and precisely defined of the two. Some courts restrict malicious prosecution to criminal proceedings,326 but more commonly both of these torts may be applied to either criminal or civil proceedings.

Fair Debt Collection: 13.7.3.8 Midland Funding and Regulation F Do Not Preclude Most FDCPA Claims Involving Bankruptcy Proofs of Claim

The Midland Funding Court did not consider whether consumers can bring claims related to a bankruptcy proof of claim when those claims do not focus exclusively on the time-barred status of the debt. Many courts have confirmed that the Supreme Court ruling does not preclude a debtor from asserting a claim that the debt collector violated the FDCPA when it falsified or misrepresented the amount owed in a proof of claim.463 Similarly, Reg.

Home Foreclosures: 8.2.5.3 Contact History

Most servicers maintain a contact history detailing communications with the homeowner and other third parties. The contact history may also list important events in the loan’s history such as the date letters were sent to the borrower or the date the loan was referred to a default servicer. Automated calls to the borrower may also be recorded in the contact history. Note that different servicer departments (e.g., collections, loss mitigation, foreclosure, tax, insurance) may maintain separate contact histories. When possible, it is best to obtain a consolidated contact history.

Home Foreclosures: 8.2.5.3a Periodic Statements

For closed-end loans, servicers are required to send periodic statements to borrowers on residential mortgage loans unless an exemption applies.40 Exemptions to the periodic statement rule apply to reverse mortgages, timeshare plans, and if the servicer provides the consumer with a coupon book that provides specific information about the loan, a practice not much used anymore.41 Small servicers, as defined an

Home Foreclosures: 8.2.5.5 Pooling and Servicing Agreement

Pooling and servicing agreements (PSAs) broadly govern the securitization of residential mortgage loans including the formation of the trust (which becomes the owner of the loans), the servicing of the loans in the trust, and the duties of various parties to the trust agreement. The PSA may outline the loss mitigation or workout options available to the servicer and the parameters of the servicer’s authority to implement those options.

Home Foreclosures: 8.2.5.6a Bankruptcy Notices

If the borrower filed a chapter 13 bankruptcy case to cure a mortgage default after December 1, 2011, Bankruptcy Rules 3001 and 3002.1 require the servicer to disclose prepetition default fees and arrearage amounts on the initial proof of claim, send notices of any mortgage payment changes, send notices of any fees and expenses that are charged to the borrower’s account during the case, and file a response at the end of the case indicating whether the borrower has fully cured the default.53

Home Foreclosures: 8.2.7.1 Land Records

The mortgage or deed of trust and any related assignments should be available from the local land registry in-person or online. Local land records also can be checked to determine: the number of loans a particular lender made in that locality; the names and addresses of the affected homeowners; whether a lender has an unusually high number of foreclosures or is repeatedly flipping loans. In property flipping cases, the land records will identify the seller of the property, and in foreclosure rescue cases, the land records will show who acquired title to the property from the homeowner.

Home Foreclosures: 8.3.1 Introduction

Foreclosure cases often involve hundreds, if not thousands, of pages of documents. Ensuring that documents necessary to prove your case are admissible is critical to a successful case. Conversely, excluding inadmissible documents offered by a lender or mortgage servicer can also affect the case outcome. This section considers the application of the Federal Rules of Evidence to various common foreclosure related documents.

Home Foreclosures: 8.11.5 Applying the 2011 OCC Preemption Standard to Servicing and Foreclosure Laws

Most preemption challenges to state foreclosure and servicing laws have arisen under the broader preemption regulations of the Office of Thrift Supervision (OTS). Now that the OTS preemption rule has been abrogated by statute and replaced by the 2011 OCC regulation, there should be fewer preemption challenges. As discussed above, the 2011 OCC preemption regulation appears to exceed the scope of preemption allowed by the Dodd-Frank Act.845 But even under that regulation, many state laws will still pass muster.

Home Foreclosures: 8.11.6.2 Preemption of State Preforeclosure Requirements

A number of decisions examine the OTS preemption issue as it relates to section 2923.5 of California’s Civil Code, which imposes requirements on a mortgage holder or servicer before it can initiate foreclosure. Specifically, before foreclosing, section 2923.5 requires a holder to contact the borrower by phone or in person, to assess the borrower’s ability to avoid foreclosure through some type of loss mitigation, and to refer the borrower to a HUD-certified housing counselor.887

Fair Debt Collection: 5.4.2 Contacts at Inconvenient Times

FDCPA § 1692c(a)(1) creates a presumption that any communication received between 9:00 p.m. and 8:00 a.m. was made at an unusual or inconvenient time. The parallel provision in Regulation F § 1006.6(b)(1)(i) (effective November 30, 2021) clarifies that this provision applies to any mode of communication between 9:00 p.m.

Fair Debt Collection: 5.4.3 Contacts at Inconvenient Places

FDCPA § 1692(c)(a)(1) and Reg. F § 1006.6(b)(1) (effective November 30, 2021) prohibit a collector from contacting the consumer at unusual or inconvenient places, and not just unusual or inconvenient times. Examples might be a hospital, a military combat zone, a church or other place of worship, a daycare,156 or a funeral parlor.

Fair Debt Collection: 5.4.4 The Known or Which Should Be Known Standard

FDCPA § 1692c(a)(1) provides that a collector cannot contact the consumer at a time or place that is “known or should be known” as inconvenient. This clearly means that once a debt collector receives a request to cease communication at specified inconvenient times or places, whether the request is made orally or in writing, the debt collector then knows the time or place is inconvenient and must honor that request.170

Consumer Arbitration Agreements: 10.6 Waiver of Right to Bring Individual and Collective Actions on Behalf of the State

The United States Supreme Court has ruled that to proceed in arbitration on an individual basis is a fundamental attribute of arbitration. To broadly allow class arbitration would “stand as an obstacle to the accomplishment of the [Federal Arbitration Act]’s objectives.”113 While the parties can explicitly agree to allow class arbitration, an arbitration agreement can also prohibit classwide relief in either court or arbitration, despite state law being to the contrary.

Mortgage Servicing and Loan Modifications: 6.2.5 Deferrals and Partial Claims

For homeowners who have recovered from financial hardships and can afford their pre-default mortgage payments, some investors have made payment deferrals available. Deferral programs generally bring the mortgage loan current by making any unpaid arrearage due as a lump sum at the end of the loan term, which may be at the sale or refinance of the loan. The borrowers then resume their former mortgage payments. These deferral programs generally do not charge interest on the deferred amounts and do not require monthly payments on the deferred balance.

Mortgage Servicing and Loan Modifications: 6.2.6.2 Deeds in Lieu of Foreclosure

It may be possible to negotiate to have the mortgage holder accept voluntary transfer of the property as an alternative to foreclosure. This is usually called a “deed in lieu of foreclosure.” Deeds in lieu of foreclosure will not be accepted by the mortgage holder if there are junior liens on the property, because in that case foreclosure is necessary for the mortgage holder to obtain clear title.

Mortgage Servicing and Loan Modifications: 6.3.2 Refinancing

If the home was financed at a high interest rate, refinancing at a lower interest rate and/or with a longer payment period can greatly reduce monthly payments. Moreover, if the borrower can obtain a good rate, refinancing a low interest first mortgage and high interest second mortgage into a low interest first mortgage can also reduce payments.

Mortgage Servicing and Loan Modifications: 6.5.5 The Homeowner’s Application for a Workout

Different mortgage holders and their servicers have different workout application processes and forms. They generally obtain financial information about the borrower’s debts, assets, income, expenses and reasons for default, with appropriate verification although there has been a recent trend to streamline and minimize the information collected. Additionally, mortgage servicers may obtain a property appraisal and/or a credit report.

Fair Debt Collection: 5.7.2 Contacting Third Parties Generally Prohibited

FDCPA § 1692c(b)’s strict limitations on third-party contacts make it one of the FDCPA’s most important protections. Section 1692c(b) protects the consumer’s privacy, and also protects the consumer’s relationship with friends, neighbors, coworkers, and others. It protects both the consumer253 and the third party from the embarrassment and strain on their relationship of how to deal with the collector’s revelation to the third party of the consumer’s private financial affairs.

Fair Debt Collection: 5.7.8 Voicemails for Consumers Overheard by Third Parties

Under Regulation F (effective November 30, 2021), voicemails that qualify as limited-content messages351 will be considered attempted communications352 and not communications.353 As a result, contacts that qualify as limited-content messages will not be third-party disclosures although voicemail messages that do not comply with that definition can still lead to third-party disclosures.