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.
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.
Typically, under the terms of the loan contract, the notice must specify the following:
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.
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 90th day of the delinquency.
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.
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:
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.
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.