Page:Dennis Obduskey v. McCarthy & Holthus LLP.pdf/5

2 exception) place those whose “principal purpose… is the enforcement of security interests” outside the scope of the primary “debt collector” definition, §1692a(6), where the business is engaged in no more than the kind of security-interest enforcement at issue here–nonjudicial foreclosure proceedings.

When a person buys a home, he or she usually borrows money from a lending institution, such as a bank. The resulting debt is backed up by a “mortgage”–a security interest in the property designed to protect the creditor’s investment. Restatement (Third) of Property: Mortgages §1.1 (1996) (Restatement). (In some States, this security interest is known as a “deed of trust,” though for present purposes the difference is immaterial. See generally ibid.) The loan likely requires the homeowner to make monthly payments. And if the homeowner defaults, the mortgage entitles the creditor to pursue foreclosure, which is “the process in which property securing a mortgage is sold to pay off the loan balance due.” 2 B. Dunaway, Law of Distressed Real Estate §15:1 (2018) (Dunaway).

Every State provides some form of judicial foreclosure: a legal action initiated by a creditor in which a court supervises sale of the property and distribution of the proceeds. Id., §16:1. These procedures offer various protections for homeowners, such as the right to notice and to protest the amount a creditor says is owed. Id., §§16:17, 16:20; Restatement §8.2. And in the event that the foreclosure sale does not yield the full amount due, a creditor pursuing a judicial foreclosure may sometimes obtain a deficiency judgment, that is, a judgment against the homeowner for the unpaid balance of a debt. National Consumer Law Center (NCLC), Foreclosures and Mortgage Servicing §§12.3.1–2 (5th ed. 2014).