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Mortgage Servicing and Loan Modifications: 9.3.3.2.6 Deed in lieu of foreclosure

A deed in lieu of foreclosure allows the borrower to voluntarily transfer the property in exchange for a release from obligations under the mortgage.181 Other loss mitigation options should be considered, including marketing the property through a preforeclosure sale process. The loan need only be more than thirty days delinquent. As with any deed in lieu of foreclosure, there should be no junior liens on the property, or the junior liens must be discharged.

Mortgage Servicing and Loan Modifications: 9.4 Debts Owed to the Federal Government

When loans guaranteed by the VA or the RHS are foreclosed, borrowers typically end up with a debt owed to the federal agency that originated the loan or paid out the insurance claim to a private lender. These debts can be for significant sums. The RHS, for example, typically adds to the deficiency debt sums for the “recapture” of subsidies for interest reduction it paid out during the life of the loan.183 Debts owed to federal agencies can be assigned to the Treasury Department for further collection action.

Mortgage Servicing and Loan Modifications: 9.5.1 Overview

The VA and the USDA (including Rural Development and the RHS) have implemented specific guidelines to assist homeowners impacted by natural or man-made disasters. Typically the agencies impose a moratorium on the initiation or continuation of foreclosures immediately after the disaster. Each agency then issues specific disaster-related guidance or may update the loss mitigation options or other requirements regarding the servicing of the loans. This section gives a broad overview of each agency’s guidance or policy regarding recent natural disasters.

Mortgage Servicing and Loan Modifications: 9.5.2.2 Mortgage Forbearance

The VA “encourages holders of guaranteed loans to extend forbearance to borrowers in distress as a result of the disaster.”189 Servicers are advised to refer to 38 C.F.R. § 36.4311, which allows the reapplication of prepayments to cure or prevent a default, and to 38 C.F.R. § 36.4315, which allows the terms of any guaranteed loan to be modified without the prior approval of the VA, provided that the conditions in the regulation are satisfied.190

Mortgage Servicing and Loan Modifications: 9.5.3.1 Generally

The USDA’s website has a page entitled Rural Development Disaster Assistance.199 This page lists the various types of assistance available for borrowers who are impacted by a disaster and have either a Rural Development or RHS Single Family Housing direct loan or guaranteed loan.

Mortgage Servicing and Loan Modifications: 9.5.3.2 Moratorium

Rural Development direct loan borrowers who face loss of income or increased expenses that impair their ability to make regularly scheduled payments may be eligible for a moratorium on payments. To qualify for a moratorium, borrowers must show that they face a hardship due to circumstances beyond their control. A natural disaster should easily meet this standard.

Mortgage Servicing and Loan Modifications: 9.5.3.3 Payment Assistance

Payment assistance is another option that can provide substantial payment relief to Rural Development direct loan borrowers facing a natural disaster. Payment assistance provides a subsidy that reduces monthly payments to a level that is affordable based on the borrowers’ income. Borrowers enter into payment assistance contracts annually. However, when unforeseen events occur, borrowers can seek adjustments to their subsidy at any time during the contract year. Reduced income as a consequence of a natural disaster would certainly be a basis to request a downward adjustment in payments.

Fair Debt Collection: 14.3.3.3 FDCPA and Other Claims for Falsifying Caller ID Information

Section 1692d(6) of the Fair Debt Collection Practices Act (FDCPA) prohibits “the placement of telephone calls without meaningful disclosure of the caller’s identity.” Meaningful disclosure has been defined as including the caller’s name, the collection company’s name, and the nature of the caller’s business.241 A federal court found a FDCPA § 1692d(6) violation where the debt collector transmitted the name “Jennifer Smith” to the recipient’s caller ID device to lure the recipient to answer the phone, where no Jennifer Smith worked for the de

Fair Debt Collection: 14.3.3.4 Consumers’ Ability to Keep Their Phone Numbers Private

Caller ID technology is particularly troublesome for consumers who wish to preserve the privacy of their telephone numbers and locations. Consumers may wish to keep their phone numbers private from creditors and collection agencies to avoid repeated or harassing phone calls. Such consumers may unwittingly give debt collectors their telephone numbers by simply calling the collector from a phone without a caller ID block.

Fair Debt Collection: 14.3.4 Protection from Electronic Messaging Harassment

The Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act)264 prohibits materially false or materially misleading headers in certain email messages.”265 It requires the sender of an unsolicited commercial email message to provide consumers a way to opt out of future messages.266 CAN-SPAM also authorizes the FCC to adopt rules to protect consumers from unwanted “mobile service commercial messages,”

Fair Debt Collection: 14.5.1 Advantages and Disadvantages of RICO Claims

Unlawful debt collection may violate the federal Racketeering Influenced and Corrupt Organizations Act (RICO).301 RICO does not prohibit unlawful debt collection itself, but rather targets those who use such debt collection or other specified criminal acts to relate to an “enterprise”302 in a forbidden manner.

Fair Debt Collection: 14.5.2.1 Generally

RICO prohibits persons from using either of two different kinds of qualifying conduct to relate to an enterprise in a prohibited manner. These two kinds of preliminary conduct are “collection of an unlawful debt” and a “pattern of racketeering activity.”305 The next two subsections discuss these preliminary requirements for any RICO claim.

Fair Debt Collection: 14.5.2.2 Collection of an Unlawful Debt

RICO defines “unlawful debt” to include debts from unlawful gambling and debts that arise from a loan that is both unenforceable under a usury law and bears a rate at twice the enforceable rate.306 A defendant need only collect one unlawful debt to meet this initial element of RICO.307 Although a plaintiff must show that a usurious debt was incurred “in connection with . . .

Fair Debt Collection: 14.5.2.3 Pattern of Racketeering Activity

The second, alternative type of qualifying activity is a “pattern of racketeering activity.” “Racketeering activity,” the core requirement of this type of qualifying conduct, comprises any of nine state criminal offenses or any of a longer list of specified federal offenses.312 Of these, mail fraud and wire fraud are the two most commonly invoked predicate offenses.313

Fair Debt Collection: 14.5.3 RICO’s Substantive Prohibitions

Once a plaintiff has shown that a defendant has either collected an unlawful debt or committed a pattern of racketeering activity, the plaintiff must show that the defendant used that conduct to relate to an “enterprise”325 in a manner that violates one of RICO’s three substantive provisions.326 The provision most commonly employed by civil RICO suits prohibits a person who is employed by or associated with an enterprise from using either the collection of an unlawful debt or a pattern of racket

Fair Debt Collection: 14.6.1 Overview

Reporting a debt to a credit bureau—known as a “consumer reporting agency” or CRA under the Fair Credit Reporting Act345—is a “powerful tool designed, in part, to wrench compliance with payment terms.”346 The collection industry has acknowledged this sentiment,347 and the CFPB noted that “furnishing information to the [nationwide CRAs] can provide an incentive for borrowers or debtors to meet their repayment obligations.”