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Obduskey v. McCarthy & Holthus: Addressing the Industry Impact

On Wednesday, the Legal League 100 [1]held a webinar that explored the potential outcomes of the Dennis Obduskey vs. McCarthy & Holthus Supreme Court case and the impact of these outcomes on both the mortgage industry and the legal professionals supporting it. The webinar was presented by Matthew Podmenik, Managing Partner, McCarthy & Holthus Law Firm [2].

The subject matter experts discussed the case overview and current status, potential Supreme Court rulings, The Legal League’s amicus curiae brief and the impact of the possible outcome on mortgage servicing and legal practices. The Supreme Court decision in Obduskey v. McCarthy & Holthus will provide clarity on whether law firms initiating non-judicial foreclosures are subject to the provisions of the Fair Debt Collection Practices Act (FDCPA).  

The webinar addressed important questions as to whether an entity that sends a notice stating that it will commence a non-judicial foreclosure to enforce a security interest under Colorado law thereby engages in debt collection, rather than the enforcement of security interests, for purposes of the FDCPA. Secondly, it also delved into whether the FDCPA applies to non-judicial foreclosure proceedings. The webinar states that the "purpose of this subchapter to eliminate abusive debt collection practices by debt collectors. It also examined state laws in relation to nonjudicial foreclosures."

Addressing the series of events leading up to the webinar, it stated that in 2007, Dennis Obduskey obtained a loan for $329,940 to buy a residential property in Bailey, Colorado, and defaulted in 2009. Later in 2014, Wells Fargo hired McCarthy & Holthus, to pursue a non-judicial foreclosure on the property. On 8/12/2015, petitioner filed suit against M&H and multiple Wells Fargo entities in the United States District Court for the District of Colorado. The firm and the Wells Fargo entities moved to dismiss the complaint, and on 7/19/16 the district court granted the motions and denied the Temporary Restraining Order.

On the same day that the district court issued its order, Obduskey filed for Chapter 13 bankruptcy and appealed to the 10th Circuit and on 1/19/18 the court of appeals affirmed the lower court’s ruling, which sought to interpret the congressional intent in passing the FDCPA by analyzing the plain language of the statute and policy considerations. A total of nine Amicus briefs by 19 entities were filed in support of  McCarthy & Holthus, LLP.

The United States along with the CFPB; Legal League 100; Mortgage Bankers Association along with American Bankers Association, Bank Policy Institute, Chamber of Commerce of the United States of America, Securities Industry and Financial Markets Association, and Western Bankers Association; USFN – America’s Mortgage Banking Attorneys; United Trustees Association along with Arizona Trustee Association, California Mortgage Association, and California Mortgage Bankers Association; Colorado Mortgage Lenders Association; National Creditors Bar Association; Commercial Law League of America; and Michigan Creditors Bar Association.

As reported in DS News [3] earlier, in the case of Obduskey v. McCarthy & Holthus, LLP, the Legal League 100 had filed an amicus curiae brief in support of McCarthy & Holthus. The brief contended that law firms acting on behalf of their mortgage servicer clients by completing the non-judicial foreclosure process in states where permitted are not subject to regulation under the Fair Debt Collection Practices Act. The brief noted that such servicers are not collecting a debt as defined under the plain language of the statute. The brief contended that law firms acting on behalf of their mortgage servicer clients by completing the non-judicial foreclosure process in states where permitted are not subject to regulation under the FDCPA.  Amicus in support of Obduskey was filed by NAAC, National Consumer Law Center and certain members of Congress.

In conclusion, the webinar discussed the possible outcomes stating “We win …. not really, as Congress could amend FDCPA and states could pass additional regulations. We lose …. for real. Servicing costs increase, resulting in higher interest rates and less affordability for borrowers. Increased timelines, litigation costs, malpractice insurance, and compliance costs.”

View the full webinar here. [4]