What's the difference between a breach letter and a FDCPA validation letter?

If you're behind in your mortgage payments and facing foreclosure, you might receive a breach letter or a Fair Debt Collection Practices Act (FDCPA) validation notice. Or, in some cases, you might get a combination letter with both types of notice.

Keep reading to learn the difference between these types of notices and what kind of information is supposed to be in the notice. If the notice you receive doesn't comply with the law, you might have a defense to a foreclosure.

Mortgage Contracts Often Require a Breach Letter

Mortgages and deeds of trust often contain a clause that requires the lender to send a notice, commonly called a "breach letter," informing the borrower that the loan is in default before accelerating the loan and proceeding with foreclosure. (The acceleration clause in the mortgage permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)

Typically, under the terms of the loan contract, the notice must specify:

• the default
• the action required to cure the default and reinstate the loan
• a date—usually not less than 30 days from the date the notice is given to the borrower—by which the default must be cured, and
• that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property. To find out the exact requirements in your situation, check the mortgage or deed of trust you signed when you took out your home loan.

To avoid foreclosure, the borrower must bring the loan current by paying the full past due amount shown in the letter before the 30 days expires. Also, some states have a law allowing a borrower who's facing a foreclosure to reinstate the loan by a certain deadline, and many mortgages and deeds of trust contain language giving borrowers a certain amount of time during which they can get current on the loan.

If the 30-day time period expires and the borrower hasn't paid the specified amount to bring the loan up to date, or worked out another option with the lender, foreclosure proceedings will likely begin. In most cases, a foreclosure can't start until the borrower is more than 120 days delinquent. So, lenders tend to send the breach letter around the 90^th day of the delinquency.

Fair Debt Collection Practices Act (FDCPA) Validation Letter

The Fair Debt Collection Practices Act (FDCPA) is a federal law that protects consumers from abusive collection practices by debt collectors and collection agencies. Whether the FDCPA applies to foreclosures generally depends on if the foreclosure is judicial or nonjudicial.

Judicial foreclosures. Judicial foreclosures are usually—but not always—viewed by courts as subject to the FDCPA because creditors are generally able to get deficiency judgments.

Nonjudicial foreclosures. In a unanimous decision, the U.S. Supreme Court determined in the case of ​Obduskey v. McCarthy & Holthus, LLP​, No. 17-1307 (March 20, 2019) that the FDCPA doesn't generally apply to firms pursuing nonjudicial foreclosures.

Requirements When the FDCPA Applies

If the FDCPA is applicable to the foreclosure, the party attempting to collect the debt must send a written notice to the debtor within five days of its first communication. The notice must contain:

• the amount of the debt, including all interest, late charges, attorneys' fees, and other charges
• the name of the creditor to whom the debt is owed
• a statement that unless the debtor, within 30 days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector
• a statement that if the debtor notifies the debt collector in writing within the 30-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the debtor and a copy of such verification or judgment will be mailed to the debtor by the debt collector, and
• a statement that, upon the debtor's written request within the 30-day period, the debt collector will provide the debtor with the name and address of the original creditor, if different from the current creditor.

Sometimes the FDCPA validation notice will be combined with the breach letter. Other times it might be a separate letter or, in some cases, it might be included with the complaint for foreclosure.

Talk to an Attorney

If you're facing a foreclosure and think the lender violated the loan contract by not sending a breach letter—or it sent an incorrect letter or an incomplete letter—or is violating the FDCPA, consider talking to an attorney to find out options in your particular circumstances. This failure or violation could constitute a defense to the foreclosure.