Mortgagors and the FDCPA, A Changing Landscape

For some time now, a majority of the District Courts have held that the transaction in which a mortgagor forecloses on a residential mortgage was not a ‘bill collection’ within the meaning of the Fair Debt Collection Practices Act. The court in Glazer v. Chase Home Finance LLC, broke from the reasoning of a majority of the districts in finding that a mortgage foreclosure at its core is an action to collect a debt and the fact that the debt may be a secured debt was of no consequence in the analysis.

The Court found that each and every foreclosure action of any type; private, public, judicial or non-judicial is done for the ultimate purpose of securing payment on the debt and as well, to collect court costs, interest and fees. With this analysis complete, it is now clear that a shift seems to be underway in expanding the scope and coverage of the FDCPA. This could be a tacit tip of the hat to the recent settlement with the big mortgage lenders.

Moving forward Lender’s Firms now need to concern themselves with good faith compliance with the FDCPA and understand the ramifications of violations in an equitable proceeding such as a residential foreclosure. This should be interesting to watch this develop and see how long it takes any of the other districts to change their position.