On April 26, 2023, the CFPB issued guidance on debt collectors, covered by the Fair Debt Collection Practices Act, threatening to foreclose on homes with mortgages past the statute of limitations. The advisory opinion clarifies that a covered debt collector who brings or threatens to bring a state court foreclosure action to collect a time-barred mortgage debt may violate the Fair Debt Collection Practices Act and its implementing regulation.
According to the CFPB, the issuance of the advisory opinion is a result of a series of actions by debt collectors attempting to foreclose on silent second mortgages, also known as zombie mortgages, that consumers thought were satisfied long ago and that may be unenforceable in court. In particular, the CFPB is focusing on “piggyback” mortgages, also known as an 80/20 loan. The CFPB’s advisory opinion aims to remind covered debt collectors that:
The Fair Debt Collection Practices Act and its implementing Regulation F prohibit a debt collector from suing or threatening to sue to collect a time-barred debt; and
The prohibition applies even if the debt collector does not know that the debt is time barred. Accordingly, any debt collector who is covered under the Fair Debt Collection Practices Act and who brings or threatens to bring a state court foreclosure action to collect a time-barred mortgage debt may violate the law.
Read the CFPB’s full news release here.
The advisory opinion can be found here.