Zuniga v. Pierce & Associates

In consolidated cases, the debtors obtained Federal Housing Administration-insured residential mortgage loans and subsequently defaulted due to financial hardship. The law firms represented the loan servicing agents in filing Illinois foreclosure complaints, using the statutory complaint template (Illinois’ Mortgage Foreclosure Law, 735 Ill. Comp. Stat. 5/15-1504(a)), which includes the language: “Names of defendants claimed to be personally liable for deficiency, if any[,]” and, “[a] personal judgment for a deficiency, if sought.” The firms included both allegations, and identified debtors to be personally liable for any deficiency. The debtors filed suit under the Fair Debt Collection Practices Act, 15 U.S.C. 1692, alleging that the FHA does not authorize deficiency judgments where borrowers suffered a financial hardship. They submitted a letter from the FHA responding to a Freedom of Information Act request, stating: There have been zero foreclosed FHA loans in Illinois in which the pursuit of a deficiency judgment was authorized. FHA is not currently pursuing deficiency judgments.” The district court dismissed. The Seventh Circuit affirmed. Debtors did not identify any law, regulation, or FHA policy requiring a mortgagee to obtain authorization from the FHA prior to including the two allegations at issue in their state-foreclosure complaint. View "Zuniga v. Pierce & Associates" on Justia Law