Attorneys representing creditors can now help their servicing and lending clients with loss mitigation efforts, thanks to a recent Federal Trade Commission advisory opinion. The opinion specifically addresses issues raised by USFN, a national not-for-profit network of mortgage banking attorneys and trustee companies.
Recognizing that many servicing shops are now asking creditors’ attorneys to help them inform borrowers about loss mitigation options, USFN saw it a necessity to ask the Federal Trade Commission about the role of creditor’s rights attorneys in the overall loss mitigation process. The primary issue being—do attorneys automatically violate the Fair Debt Collection Practices Act (FDCPA) when they work on behalf of foreclosure creditors, while at the same time advising a homeowner of loss mitigation options that may be availablex
The FTC answered this question last week, saying as long as attorneys follow all of the FDCPA rules, they would not automatically violate the FDCPA by providing loss mitigation options at the commencement and during the foreclosure process.
USFN President Rich Leibert and USFN Chief Executive Officer Alberta Hultman say the opinion rendered by the FTC clears up a lot of questions attorneys have had about these communications.
“Attorneys must be very careful to adhere to FDCPA laws, if we are considered ‘debt collectors’ when acting on behalf of our servicing clients,” said Leibert. “If attorneys are sending out a foreclosure notice or a foreclosure complaint (depending on your state law), and the attorney is also sending a borrower information that provides options available for the homeowner to possibly retain their home—the concern was that this second part of the communication might violate fair debt laws even though that wasn’t the intent. So the USFN asked the FTC if they could provide some clarification which will allow attorneys to be more helpful to borrowers at an opportune time in the process, before the foreclosure becomes a completed action.”

Hultman says the decision is good news but not a fail safe or change in the law, but one that makes communication of loss mitigation options easier for both parties and less questionable for the law firm or trustee. Hultman stresses that it’s particularly beneficial to have the decision because borrowers benefit from receiving loss mitigation information early in the process from the attorneys.
“I think many borrowers are going to appreciate this,” said Hultman. “It’s not a guaranteed protection that provides immunity from FDCPA violation by any means. But, I do believe this advisory opinion provides an opportunity for the attorney or trustee to be more helpful to a borrower, as long as you’re complying with all of the FDCPA tenets that we’ve always had to comply with, so, there’s somewhat of a comfort level. I will stress that it’s not a safe harbor, but if you’re doing everything else properly, you’re not going to automatically trigger the FDCPA.”
Leibert says the opinion demonstrates that loss mitigation has become a top priority to all in the mortgage servicing market.
“There is a lot of proposed legislation discussing implementing mandatory loss mitigation between the borrower and servicer,” said Leibert. “It illustrates the national concern of trying to help homeowners retain their homes. Within our industry, we’ve known that this is a common goal of the servicers and the investors, and the USFN felt it was crucial to allow the lawyers and trustees to be able to assist in that effort. It benefits all parties.”