March 21, 2019
By: John Baxter
The United States Supreme Court issued its unanimous opinion in the case Obduskey v. McCarthy & Holthus LLP[1] on Wednesday, March 20. The court’s ruling effectively removes nearly all activities taken by creditors seeking nonjudicial foreclosure of liens and mortgages from the ambit of the Fair Debt Collection Practices Act, or FDCPA,[2] save for one provision. This decision resolves a circuit split and will have significant ramifications for all lenders and borrowers who live in jurisdictions that allow for nonjudicial foreclosure.
Nonjudicial foreclosure is the practice by which a lender may foreclose on a security interest, typically a mortgage, with minimal court intervention — or no court intervention at all — pursuant to local laws and the terms of the contract creating the security agreement. Whereas judicial foreclosure traditionally requires the formalities of a full-fledged lawsuit, nonjudicial foreclosure, where allowed, is typically a faster and less rigorous process. Generally, the nonjudicial foreclosure process requires that a lender provide some sort of published notice of foreclosure, usually over a period of weeks, followed by a public, scheduled foreclosure sale. Some states, like Colorado — out of which the Obduskey case arises — require slight court oversight. Other states do not require any court intervention. Currently, 33 states and the District of Columbia allow for some form of nonjudicial foreclosure.
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