A group of homeowners filed a complaint last week alleging a debt collector is violating a recent Maryland law by bringing foreclosure actions on debts that are more than three years old.
The filing was made as a counter claim or, alternatively, as a third-party class action complaint on March 7 in a foreclosure lawsuit filed in Montgomery County last year against a Germantown family.
The proposed class of plaintiffs alleges the law firm, North Carolina-based Brock & Scott LLC, and others have pursued foreclosure actions on second mortgage liens that are more than three years old. A 2014 Maryland law shortened the statute of limitations to three years and a 2016 law prohibited filing suit on time-barred debt.
“It’s the aftermath of the foreclosure crisis, still, because we have all these second mortgages just sitting around,” said Phillip R. Robinson, attorney for the plaintiffs.
Robinson said Brock & Scott filed the foreclosures on behalf of a group of equity funds that purchased mortgage debts. The defendants in the case at issue defaulted on their second mortgage in 2013 and the equity fund bought the debt in 2017. Brock & Scott sent a notice of intent to foreclose in October 2018 and filed suit in November.
Many banks walked away from second liens after the foreclosure crisis. Robinson said he has not previously seen an entity sue to collect on them in such a fashion.
“Apparently Brock & Scott is representing second lien holders and filing foreclosure actions on debts that nobody has heard about for years,” said Robinson, of the Consumer Law Center LLC in Silver Spring.
Robinson said he plans to move to dismiss the foreclosure action but has found a potential class of homeowners who are being similarly sued in violation of Maryland law.
“Notwithstanding that their actions are prohibited under Maryland law the Foreclosure Plaintiffs and the Counter Defendants have placed their interest above that of homeowners and the courts which they are utilizing for their collection activities and unfairly and deceptively ignore the laws governing their activities,” the complaint alleges.
Thomas W. Hodge, a Brock & Scott attorney named as counsel for the firm in the foreclosure action, could not be reached for comment Wednesday.
Robinson said that while Attorney General Brian E. Frosh asked for the 2016 law change barring the filing of any action past the three-year statute of limitations, this case was the first time in his experience that it has come up.
The complaint alleges violations of the Fair Debt Collection Practices Act and the Maryland Consumer Debt Collection Act and seeks an injunction prohibiting further violations of the law, as well as a declaration that the debt collection defendants are not entitled to initiate an action based on time-barred debt and statutory damages.
The case is Thomas W. Hodge v. Jose Maria Alfaro et al., 458534-V.