Borrowers are scrutinizing default notice practices in a budding class action lawsuit against a servicer.

North Carolina-based plaintiffs say their case against Selene Finance could encompass thousands of homeowners, if their proposed class is certified by a federal judge. Three borrowers sued the servicer in late 2023 for allegedly violating the Fair Debt Collection Practices Act [FDCPA], over the company's purportedly deceptive notices of default.

Law360 first reported the filings.

Servicers are periodic targets of FDCPA and similar consumer complaints, in cases that aren't typically resolved quickly. The Selene fight came well ahead of a significant rise in FDCPA complaints nationwide, as consumers have unleashed a torrent of litigation this year.

The Selene case heated up this summer as plaintiffs in July filed a motion to certify a class of at least 2,569 North Carolina borrowers who received the notices in question. The servicer responded with a motion for summary judgment, and last week filed a response to the class certification bid. 

Plaintiffs accuse the company of threatening foreclosure well ahead of a federally mandated 120 day delinquency period. They also take issue with language around the payment needed to fulfill borrowers' obligations, accusations which Selene has countered.

Neither attorneys for the parties nor a spokesperson for Selene responded to requests for comment Thursday. 

The Texas-based Selene manages a servicing portfolio of approximately $32 billion in unpaid principal balance, according to a 2025 S&P analysis. It's owned by Pretium Partners, an investment firm which owns other real estate firms including non-qualified lender Deephaven Mortgage. 

The dispute

The claims stem from Selene's issuance of letters to the borrowers in question: a notice of default and intent to accelerate, and a North Carolina disclosure. 

The sides are debating the servicer's policies, as plaintiffs suggest the company told them only payment of the full past-amount due would cure the foreclosure notice. Selene says its policy allowed the servicer to accept payments smaller than the full-amount due, if the loan was less than six months past due.

Borrowers also accuse Selene of changing a phrase on its North Carolina disclosure after the lawsuit was filed, switching a wording that it would accelerate the maturity date, from "will" to "may."

In arguing against class certification, Selene told the court that the inquiries are too individualized, with each plaintiff potentially having a different timeline to receive default notices. The servicer has also argued that plaintiffs haven't proved they suffered concrete injuries, and that they failed to work with the servicer on their grievances before suing. 

Consumers score wins against servicers

Servicers have had mixed success in battling consumer lawsuits, particularly with pay-to-pay claims.

Dovenmuehle Mortgage in May agreed to a $9 million settlement to cover claims that it illegally profited off servicing fees. Thousands of class members could be in line to receive around $425 per each $11.50 charge they paid when making a mortgage payment over the phone, according to a settlement notice. 

Newrez settled a lingering pay-to-pay case in June, as the plaintiff was moving to certify a class of over 7,000 borrowers. Another consumer who persuaded a judge last year to keep a pay-to-pay case against PennyMac afloat has until December to file a potential motion for class certification, according to a federal case docket. 

A judge meanwhile dismissed a FDCPA case against Mr. Cooper last fall, over its fees to borrowers for expedited payoff quote statements. Those consumers have appealed that ruling.