In a recent decision (Maynard v. Cannon), the Tenth Circuit acknowledged, but declined to take a position on, the debate as to whether a non-judicial foreclosure constitutes "debt collection" under the Fair Debt Collection Practices Act (FDCPA).
A non-judicial foreclosure can be initiated in certain jurisdictions by filing a notice of default with the applicable county clerk. A non-judicial foreclosure is different from a judicial foreclosure in that a non-judicial foreclosure does not preserve the right to a deficiency judgment. In comparison, a judicial foreclosure allows for a post-sale judgment for any deficiency in the loan amount that is not covered by the sale. However, in the event of a non-judicial foreclosure sale, any deficiency can only be sought by a separate lawsuit for breach of contract.
In Maynard, a homeowner sued a law firm to which the deed of trust was transferred for attempting to foreclose on her property after she stopped making her mortgage payments. The law firm initiated a non-judicial foreclosure and informed the homeowner of the foreclosure proceedings by mail with what the court deemed to be the proper FDCPA notice. Additionally, it responded to the homeowner’s written dispute of the debt, providing her a copy of the deed of trust showing the principal amount owed, confirming her identity as the proper person against whom the claim was being made, and providing the total amount of the claim.
The law firm argued that the FDCPA does not regulate the enforcement of a security interest through non-judicial foreclosure actions. The court noted that several district courts have found non-judicial foreclosures are not debt collections, because they do not require the consumer to pay any money at all. The court avoided taking a position on the issue, ruling instead that, even if a non-judicial foreclosure is debt collection, the notice of the foreclosure and letter of confirmation from the law firm to the homeowner did not violate the FDCPA.