What's the Difference Between a Breach Letter and an 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 them. 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, especially the official Fannie Mae/Freddie Mac security instruments, 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. Sometimes, the mortgage or deed of trust will refer to this requirement as a "notice of default."

However, some state foreclosure laws also require a separate "notice of default," which must be recorded in the land records. So, this terminology can be confusing.

Contents of a Breach Letter

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

• 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 notice requirements in your situation, check the mortgage or deed of trust you signed when you took out your home loan.)

Avoiding Foreclosure

To avoid foreclosure, the borrower must bring the loan current by paying the total past due amount shown in the letter before the 30 days expire. Also, some states have a law allowing a borrower facing a foreclosure to reinstate the loan by a specific deadline. And many mortgages and deeds of trust contain language giving borrowers a specific amount of time to 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.

When Will the Lender Send the Breach Letter?

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.

What Is an FDCPA Validation Letter?

The 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 whether 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 can generally 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 to a Foreclosure

If the FDCPA applies 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, among other things:

• 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 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 can be a strong defense to a foreclosure.