• DYE CULIK PC | Consumer Protection Division

Federal Debt Collection Law Violated by Collection Letters from Mr. Cooper to Homeowners, Says Court

Updated: Jan 22

Mortgage servicer Mr. Cooper, formerly known as Seterus, was sued by homeowners claiming its debt-collection letters were misleading. A North Carolina federal court has ruled against Mr. Cooper and is allowing the class-action lawsuit to proceed under the Fair Debt Collection Practices Act (FDCPA).

The lawsuit, filed in the U.S. District Court for the Middle District of North Carolina, says that Mr. Cooper’s collection and foreclosure letters violated the FDCPA. The lawsuit also claimed the letters violated the North Carolina Unfair and Deceptive Trade Practices Act, G.S. § 75-1.1. The violation alleged was that the letters threatened to move forward with foreclosure by a certain deadline but that the deadline was never intended to be followed by Mr. Cooper. It was an empty threat that tried to scare homeowners without Mr. Cooper being serious on following through.

The court dismissed some claims and allowed others to proceed. What is interesting about the decision is that it gives an overview of Mr. Cooper’s servicing business. According to the decision, Seterus/Mr. Cooper service thousands of mortgages for homeowners in North Carolina. Though Mr. Cooper is only a servicer, not a lender, all the mortgages it collects are owned by Fannie Mae. Fannie Mae is the nickname of the Federal National Mortgage Association, a federally chartered corporation that owns a huge share of homeowners’ mortgages. These mortgages are generally securitized and sold out for collection to mortgage servicers like Mr. Cooper.

Loans backed by Fannie Mae all have to be serviced according to uniform guidelines contained in the Fannie Mae Single-Family Servicing Guide. These are quasi-governmental guidelines are they are publicly available. The guide contains information mortgage collections, forbearances, loan modifications, and foreclosure.

There have been many lawsuits filed against Mr. Cooper, individual cases and class actions. The allegations in those lawsuits include things like foreclosing illegally, making misrepresentations, wrongly denying loan modification applications, and misapplying homeowners’ mortgage payments. These types of claims are not unique. Most of what mortgage servicers do is handled by computerized systems, and customer service representatives seem to have little ability to correct errors. The same types of claims are made against other major banks and mortgage servicers, too.

The court in this case certified the homeowners’ class action for violating the FDCPA. Though some other claims were dismissed, the case will now move forward toward trial. A copy of the court’s decision is here: Koepplinger v. Seterus

DYE CULIK PC is a consumer financial protection law firm located in Charlotte, NC and Boston, MA. Our attorneys have focused our practice in the litigation and negotiation of issues involving mortgages, foreclosures, loan modifications, forbearances, and other mortgage disputes. If you have an issue with your mortgage, contact us to see if we can help.