I would add that this collection agency needs to provide you with the assignment in the interest in the debt. In other words, they claim to have purchased this debt from somewhere else and now want to collect from you. But in order to be entitled to collect from you, they need to show an unbroken chain of ownership from the original to them. Many times they simply cannot make that showing.
See a consumer law attorney in your area, bring all the documents you have received from them, or from anyone in regard to this debt. There;s always a possibility that their sloppy transaction work will leave you with an "out." Depending on what has transpired, the attorney may be able to request fees and costs from the collection agency as well.
The threat of litigation may result in better terms or settlement or even a dismissal of the debt by the court. Good luck!
A debt is a debt regardless of the nature, in this case, of the underlying collateral.
The creditor's right to payment is unrelated to allegations of mold in the home.
The outstanding amount of the debt, less any amount that would be received by the creditor from the foreclosure sale, would still be owed by you to them as a "deficiency" and they could reduce this to judgment against you.
My best advice: see a bankruptcy attorney as soon as possible.
This answer is provided for informational purposes only. Actual legal advice can only be provided in an office consultation by an attorney licensed in your jurisdiction, with experience in the area of law in which your concern lies.