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Top court takes on foreclosure rules in unrelated cases

In two separate opinions published Monday, the Maryland Court of Appeals interpreted recent foreclosure laws that were enacted to protect defaulting borrowers and people who rent from them.

The results were mixed.

In the first case, the high court sided with a tenant who had been given confusing and contradictory notices of eviction after her rental home was foreclosed. In the second, the court rejected a challenge by a defaulting borrower who had waited more than a year to complain that the notice of intent to foreclose was defective because it did not include the names of all the secured parties.

Both opinions were unanimous, and were written by Judge Robert N. McDonald.

In the first case, tenant Judy Curtis leased a property in Pasadena in 2007 that was later foreclosed by the bank. Curtis, who is still in the property, questioned how the notices were handled by the bank. The Court of Appeals agreed with her and the bank now has to file a proper notice of eviction or arrange a lease. Curtis has been paying rent into a court account pending resolution.

C. Matthew Hill, who argued the case in the Court of Appeals, said he was very happy with the court’s decision.

“We think this opinion does a great job of firming up the rights of tenants when the property is in foreclosure,” said Hill, who is with the Baltimore-based Public Justice Center. “The court said they can’t just send a vague notice and then wait out 90 days and hope time solves the defects of the notice. You can’t do a shortcut around the process.”

Virginia Wood Barnhart, with Treanor Pope & Hughes P.A. in Towson, who represented U.S. Bank on the appeal, declined to comment on the case.

The landlord had refinanced the mortgage not long before Curtis rented the property. The mortgage was assigned to a mortgage-back securities trust with U.S. Bank N.A. as the trustee. The landlord defaulted on the loan in 2009 with a valid lease in place through October 31, 2010.

USBNA started foreclosure proceedings as required by state laws that predated the adoption of the more wide-ranging federal Protecting Tenants at Foreclosure Act.

According to court documents, the bank sent Curtis, or, in some cases “occupant” eviction notices. In one notice she was told to “immediately” vacate the premises while another mentioned a 90-day notice.

“She got one notice saying you need to leave now, another saying leave in 90 days and then they went to court and said it had to be now,” Hill said. “They were trying to compress the process into two weeks when it should take 90 days.”

Notice enough

The second case dealt with a Prince George’s County homeowner whose house was foreclosed on by the successor to the failed IndyMac Bank.

Camille L. Shepherd claimed the notice of intent to foreclose was defective since it did not list all of the secured parties.

McDonald said that, as a matter of form, all secured parties should be listed on the notice, but not doing so is not always grounds for dismissal.

Shepherd, an attorney, got a $416,900 mortgage in April 2007 from Independent National Mortgage Corp. FSB, or IndyMac Bank. IndyMac Bank went into receivership not long afterward and the loan ended up at IndyMac Federal Bank FSB, a bridge bank created after the fall of IndyMac.

Shepherd was able to modify her loan, but went into default in November 2008.

Nothing was done immediately, and the loan was transferred to newly created OneWest Bank FSB in March 2009. Shepherd received notice of intent to foreclose, identifying OneWest as the secured party, in June 2009. She filed for Chapter 7 bankruptcy a few weeks later.

After the bankruptcy stay was lifted, a foreclosure action was filed on Oct. 28, 2009 in Prince George’s County Circuit Court. OneWest was listed as the “holder of the note” while the owner of the loan was listed as the Federal Home Loan Mortgage Corp. (Freddie Mac). Shepherd said this was the first time Freddie Mac was listed as being involved.

The sale of the home was postponed while Shepherd twice filed Chapter 13 bankruptcy petitions. After the second petition was dismissed, the sale was rescheduled for January 2011.

On Dec. 15, 2010, Shepherd moved to have the foreclosure dismissed, citing the failure to list Freddie Mac as a secured party in the June 2009 notice. The circuit court denied the motion, and the foreclosure sale took place on March 8, 2011. Freddie Mac purchased the home for $237,276.

Shepherd appealed, claiming that Freddie Mac was the secured party since it owned the loan, and that OneWest, as the loan servicer, could not also be the secured party.

Monday’s opinion upheld the sale. The court noted that Shepherd had been aware of Freddie Mac’s ownership of the loan at least four months before the first scheduled sale and 18 months before the sale took place.

McDonald said there was no record of Shepherd contacting the company and she did not file the motion to dismiss until more than a year after learning Freddie Mac had the loan.

WHAT THE COURT HELD

Case:

Shepherd v. Burson, CA No. 110, Sept. Term 2011. Reported. Opinion by McDonald, J. Argued April 10, 2012. Filed Aug. 20, 2012.

Issue:

Does failing to identify all secured parties in a Notice of Intent to Foreclose require dismissal of the foreclosure action?

Holding:

No; affirmed. While the notice should ordinarily identify all secured parties, it is not always a basis for dismissal. This notice included sufficient information to allow the borrower to seek a loan modification, and she did not move to dismiss the proceeding on the basis of a defective notice for more than a year after the disclosure.

RecordFax # 12-0820-23 (23 pages).

WHAT THE COURT HELD

Case:

Curtis v. US Bank Nat’l. Ass’n., CA No. 96, Sept. Term 2011. Reported. Opinion by McDonald, J. Argued March 6, 2012. Filed Aug. 20, 2012.

Issue:

Did the trial court err in denying tenant’s argument that confusing and contradictory eviction notices sent to a tenant of a foreclosed home was a violation of the Protecting Tenants at Foreclosure Act?

Holding:

Yes; misleading or contradictory notices about the right to remain in a residence do not satisfy the Protecting Tenants at Foreclosure Act.

RecordFax # 12-0820-22 (18 pages).