It’s a business. Anyone can make a claim. Anyone can say that they are representing someone who has a claim. If you don’t contest it, the claim might be presumed as valid even though it has no basis in fact. The investment banks don’t want you to read articles like the above link in Forbes magazine. Besides corroborating many of the strategies and tactics that I have strongly recommended, it also corroborates the fact that many claims, especially those from unknown debt collectors, cannot be supported by any evidence or proof. You can use a federal Debt Validation Letter or Debt Verification Letter to stop a foreclosure, gather material facts you need to exhibit to a complaint, and lay the necessary groundwork for a mortgage fraud lawsuit. Download free debt validation letters and other legal documents at https://fraudstoppers.org/free
Using Debt Verification And Debt Validation Letters To Respond To Collectors
Say you are sitting around on a Sunday evening, getting ready to watch a professional football game on television, when the phone rings. It’s a debt collector, calling to demand payment of a debt you don’t recall owing. What do you do?
A typical response might be to hang up, shake your head and check to make sure the nachos aren’t overheating. But a better move might be to take a few seconds to ask for and write down the names of the caller and the debt collection company, as well as the company’s street address and phone number. Then, before you settle down for kickoff, make a note to send a debt verification letter.
Never heard of one? A debt verification letter is a powerful tool a consumer can use to fend off unscrupulous, abusive or simply mistaken debt collection efforts. It’s a document you can send to someone who says you owe money to inform them that you don’t recognize the debt, demand that they prove you owe it and instruct them to leave you alone.
Consumer Debt Collection Protections
It may seem unlikely that a simple letter can be part of an effective approach to dealing with misguided debt collection efforts. But it’s real. The mechanism is set up by the Fair Debt Collection Practices Act (FDCPA), a 1977 law Congress passed to rein in debt collectors.
When you send a collector one of these letters, the company is supposed to send back a debt validation letter supporting its claim. If it can’t or won’t, the claim is likely to be dropped. If that happens, you won’t get any more game-time interruptions, at least from this collector.
This is far from being a solution in search of a problem. About 70 million people—one in three consumers—were contacted about debt collections during 2020, according to the March 2021 annual report by the Consumer Financial Protection Bureau (CFPB), a federal agency charged with enforcing the FDCPA.
More than half of those consumers said the debt collector was mistaken. The main problem, reported by nearly half of those who claimed a mistake, is that someone else owed the debt. Other reasons included never receiving the product or service the debt was supposed to pay for or experiencing identity theft. Some said they’d already paid off the debt or discharged it through bankruptcy.
The debt verification letter is the consumer’s first defense against errant debt collections. Not using it is often—although not always—a mistake. If you don’t send one of these, a debt collector may assume the debt is valid and continue pursuing collection. If the debt is not legally valid and the debt collector has little or no chance of ever forcing you to pay, a debt verification letter can quickly get them to back off.
Verification Letter Basics
Both the letter you send to a debt collector and the letter the collector sends back may be called either debt verification letters or debt validation letters. There is no strict labeling protocol. However, it seems confusing to use the terms interchangeably. This article will refer to the letter from the borrower as the debt verification letter and the letter from the collector as the debt validation letter.
A debt verification letter doesn’t have to say anything fancy. Just state that you’re responding to a collection effort, you don’t recognize the debt, you are demanding they prove you owe it and, if they can’t, to stop contacting you. That’s it.
You can find various templates for debt verification letters online. Some are of considerable complexity and address several other matters. You can, for instance, request contact information for the original creditor. This could be useful because debt collectors typically just purchased old debts to collect whatever they can.
The debt collector may know little or nothing about the transaction that originally created the alleged debt. And, challenged to produce a document such as a note or contract backing up the debt, the collector may just give up the fight. But a basic debt verification letter can also accomplish the same thing.
Timing is an important and specific concern. The consumer has 30 days to send the debt verification letter. If you don’t attend to it within a month, the debt may, again, be presumed to be valid and collection efforts may continue. Then the debt collector has five days to respond in writing. Failing to do that doesn’t mean you don’t owe the money, but it could be grounds for a lawsuit against the collection agency.
How you send your letter also matters. Email, fax, regular mail and other untracked methods are not good. You need a way of showing that you mailed the letter, when you mailed it and that it was delivered to the recipient. U.S. Postal Service certified or priority mail can provide this level of tracking.
Validation Letter Basics
The validation letter is the one from the debt collector back to you, the supposed debtor. It is supposed to support its claim with some sort of proof. The FDCPA is a bit vague here, but supporting documentation could consist of, for instance, a copy of a court judgment affirming the debt. If you ask for the name and address of the original creditor, which may be a credit card company, bank, retailer, utility, etc., the validation letter is supposed to include that.
The original verification letter the debtor receives will rarely include any proof that the original creditor has formally assigned the debt to the collection agency. Agencies buy these debts for steep markdowns, commonly pennies on the dollar, hoping that they’ll be able to collect enough to show a profit.
However, they don’t usually arrange to have the creditor formally assign the debt to the collector. Lacking that, they may have little ability to pursue the debt beyond making simple demands. As a general rule, debt collectors want to avoid costly court appearances and, if they don’t have the required documentation, they are even less likely to sue.
A verification letter is a good way to weed out fraudsters and con artists. Scammers rarely respond to a verification demand. Even legitimate debt collectors have to stop contacting you about a debt once they have received the verification letter, at least until they respond with a validation letter.
If you get a validation letter, it may not verify much. Skepticism is in order here. If the letter consists of pages of what sounds like complicated lawyer language, it may well be an attempt to overwhelm you.
If you do get back some solid validation, such as a contract with your signature, that doesn’t mean you must or should pay whatever they’re asking. You can also demand an itemized statement of the amount. It may include attorney’s fees or other charges you never agreed to pay and probably don’t have to pay.
Even if the debt does appear to be valid, well supported and not inflated, you may still not have to pay because of the statutes of limitations on debts. States have varying laws on this, but the term usually runs three to six years. Check with your state attorney general’s office to be sure. If a debt was incurred longer ago than the statute of limitations states, it is probably no longer valid and you won’t have to pay it.
Validation and Verification Letter Limitations and Benefits
Validation and verification letters can be helpful but won’t solve all debt collection problems. For example, a collector can continue trying to collect a debt that is past the statute of limitations. They just can’t force you to pay it.
Also, no matter what the result of your exchange of verification and validation correspondence, it won’t necessarily affect your credit report. A debt someone is trying to collect may not even show up on your credit report. If it does appear there, a bad debt can be on your report for up to seven years, whether validated or not. The same goes if a debt is barred from collection because the statute of limitations has run out.
Sometimes, however, debt verification letters are just the ticket. A debt verification letter can be highly effective in a genuine case of mistaken identity, for instance. Also, if a debt is many years old, a debt collector may not be able to produce any documentation showing you actually owe it.
Similarly, when a collector has bought a debt from the original creditor, it may also be difficult for the collector to document it. In these cases, a demand to stop bothering you about the debt is likely to be effective.
Although debt verification letters are powerful, sometimes, you may not want to send one. For instance, if you plan to pay off the debt, you may not want to demand proof that you owe it. It may be faster and easier simply to offer a discounted lump sum payment rather than make the collector jump through hoops for no purpose.
Also, if a debt is about to go past the statute of limitations, it may be wiser to do nothing. It’s possible that in your communications you might, for instance, inadvertently acknowledge the debt. This could restart the collection time period. Another time to consider skipping the verification letter is if the demand comes from the original creditor rather than a debt collection agency. Presumably, the original creditor has all the paperwork handy. You might be better off trying to quickly cut a deal.
Your Rights as a Debtor
Debt verification and validation letters are two of many FDCPA protections. Collectors are also restricted from calling before 8 a.m. or after 9 p.m. local time, contacting you at work if you tell them not to, telling anybody else about your debt, harassing you or lying about what you owe. They can’t claim to be members of law enforcement, threaten you with arrest, use a fake name or try to slip inaccurate information about you into your credit report.
There’s much more in the FDCPA designed to give hard-pressed consumers a rest from predatory collectors. If a verification letter doesn’t help, or if you have any concerns about a collector, you can complain to the Federal Trade Commission or your state attorney general. Meanwhile, you can make a note to send that letter and go back to your game, secure in knowing you have real options to defend yourself and your finances.
Who Owns Your Mortgage Note?
Have you ever asked who owns your mortgage note? A better question to ask is, “If I paid off my mortgage loan tomorrow, would I get clear and equitable title to my real property?” If your mortgage loan contract was converted into a mortgage backed security and sold to an investment trust on Wall Street you might not!
If you are thinking of applying for a loan modification, or refinancing through the Home Affordable Refinance Program (HARP), Home Affordable Modification Program (HAMP), or other program(s) under the Making Home Affordable (MHA) initiative there are a few things to consider.
First, remember that the entity who claims to own your mortgage loan is not automatically the same entity that may be servicing your mortgage loan. A loan servicer is a debt collections company that sends you mortgage statements, takes your payments each month, and if you have an escrow account, pays your homeowner’s insurance and property tax bills. But who really owns your mortgage loan?
If you want to find out here are a few things you can do:
- Ask the servicer. Your loan servicer is legally obligated to tell you the name, address, and telephone number of the owner of your loan as shown in their records. It’s a good idea to ask them in writing officially with a “Qualified Written Request” via certified mail while keeping a log of your communications. The name of your servicer should be on your mortgage statement, but you can also use the MERS link below.
- Original lender. Your loan may have never been sold, and still kept as a “portfolio loan” with the original lender. That’s the way loans used to be done!
- Fannie Mae. In reality, many loans are sold to FNMA aka “Fannie Mae”. See Fannie Mae loan lookup tool.
- Freddie Mac. Similar story with Federal Home Loan Mortgage Corporation (FHLMC) aka “Freddie Mac”. See Freddie Mac loan lookup tool.
- Mortgage Electronic Registration Systems, Inc. (MERS) is a big online registry designed to replace the costly process of publicly recording mortgage ownership at the local government level with a private electronic version that allows the swapping of mortgages with no friction at all. MERS tracks both the servicing rights and ownership of mortgage loans in the United States, although the accuracy has been called into question. See MERS ServiceID lookup tool. You can also call them at 888-679-6377 FREE.
- Search the Securities and Exchange Commission (SEC) for the alleged trust that claims they are the owner of your mortgage loan: https://www.fraudstoppers.org/how-to-search-the-sec-for-a-securitized-trust
- Register for a Free Mortgage Fraud Analysis and Securitization Search. Complete our Mortgage Fraud Analysis form and we will conduct a free securitization check to see if your mortgage loan contract was converted into a mortgage backed security and who really owns your note. If your loan was securitized than you may have legal standing to sue your lender, or current loan servicer, for mortgage fraud and quiet title. Find out more by completing our Mortgage Fraud Analysis form or call us at 773-877-3655 and we will help you get the facts and evidence you need to get the legal remedy you deserve.
Cases like the Glaski v. Bank of America and Jesinoski v. Countrywide Home Loans may have provided hope for homeowners who were victims of mortgage and foreclosure fraud. But they did not strike at the heart of the real problem behind the securitization of millions of mortgage loans.
The Glaski decision states that if some entity wants to collect on a debt they must first legally own that debt. Furthermore, if that entity is claiming ownership by way of an Assignment, it must prove that Assignment is legally valid.
The Jesinoski case addressed a borrower’s right to rescind, or cancel, their mortgage loan contract under the Truth in Lending Act (TILA) by only providing written notice to the lender, without filing suit. A loan is rescinded at the time the rescission letter is mailed. If the lender wants to refute or fight the rescission they must file an action to do so, and they have limited time to do so.
If your mortgage was securitized (the practice of pooling mortgages and selling their related cash flows to third party investors as securities) then it was part of a table funded transaction. In a table funded transaction the borrower named on the note is NOT in debt to the lender (“Pretender Lender”) because they signed the note in the capacity of an Accommodation Party, or co-signer for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument!
The broker, or originator, of the loan is pretending to loan money to the alleged “Borrower“, but in reality they trick the alleged “Borrower” into co-signing on a note that is pledged as collateral on a warehouse line of credit with the funding bank.
It is illegal for banks to loan credit, they can only loan money!
But if the Pretender Lender is not the entity putting up the funds, then there is no underlining indebtedness between the alleged “Borrower” and the originator who is named on the note. And if there is no underlining indebtedness between the parties named on the note, then the mortgage (or deed of trust) vaporizes into nothingness, and is legally unenforceable as a matter of law.
If your mortgage loan contract was part of a table funded transaction and converted into a mortgage backed security that was sold to an investment vehicle, or trust, on Wall Street, then you may have legal standing to rescind your mortgage loan contract, and sue your “Pretender Lender” for Special Damages equal to triple the original amount of your note, plus clear and equitable title to your home!
Fraud Stoppers is part of a National Private Members Association that provides back office litigation support to law firms, foreclosure defense advocacy groups, and pro se litigants nationwide. Our Private Members Association can help you sue your lender for mortgage fraud, with or without an attorney.
Then after our free mortgage fraud analysis is done, we can scheduled a free potential cause of action consultation to discuss your loan and lawsuit in detail and help you get started filing your state and federal lawsuit for the remedy that the law entitles you to, and that you deserve!
You can save 60% to 70% in legal fees when you get your lawsuit started yourself, Pro Se, (without an attorney), and then bring in a local attorney to help you at trial, where you need them the most! This way you can get the best of both worlds: Save money in legal fees, and get the professional help you need at the same time!
FRAUD STOPPERS Private Members Association (PMA) has a PROVEN WAY to help you save time and money, and increase your odds of success, suing the banks for mortgage and foreclosure fraud.
Our primary focus is helping you get clear and marketable title to your property by arguing that the actions of the banks have made the security provisions of the mortgage/deed of trust unenforceable as a matter of law.