On December 16, 2014, the Court of Special Appeals (Court) issued a reported decision in the case of Granados v. Nadel, et al., No. 242, Sept. Term 2013, 2014 WL 7148922 (Md. Ct. Spec. App., Dec. 16, 2014). The full decision is available here. This case interprets requirements related to the Notice of Intent to Foreclose (NOI), the statutorily prescribed notice that lenders must send to borrowers before initiating a foreclosure action.
At issue in the Granados case was whether a lender could rely upon a NOI issued by a prior lender in connection with an earlier foreclosure action that was voluntarily dismissed (Old NOI). Although the Court declined to "set an expiration date for a [NOI]", it determined that "when a lender institutes a foreclosure action, and then dismisses that action, the lender should issue a new NOI." (Slip op. at 23).
In March 2010, Granados (Appellant) received the Old NOI from PNC Bank (PNC). Subsequently, PNC filed an Order to Docket (OTD). PNC later voluntarily dismissed the foreclosure action without prejudice. Thereafter, PNC sold or transferred the loan to Wells Fargo Bank, N.A., Trustee to RMAC Pass-Through Trust, Series 2010-7T (Wells Fargo).
The Appellant remained delinquent on his repayment obligations following the sale of the loan to Wells Fargo. In February 2011, Wells Fargo filed an OTD to foreclose on the same loan. Wells Fargo did not issue a new NOI to Appellant, but instead relied upon the Old NOI. The foreclosure was ratified and confirmed by the Circuit Court for Prince George's County.
The Court of Special Appeals held that the Old NOI on which Wells Fargo relied was insufficient to satisfy the purpose and intent of the statutory requirements. (Slip op. at 24-25). The Court held that although the Old NOI satisfied its purpose in the first foreclosure action brought by PNC, it did not in the second foreclosure action because, by the time of the second foreclosure action, the Old NOI was both incomplete and inaccurate because it did not contain the name of the current secured party, name of the servicer, and contact information for someone authorized to perform a loan modification. (Slip op. at 26). The Court ordered the Circuit Court for Prince George's County to set aside the foreclosure sale and dismiss the foreclosure action.
The Court, in reaching its holding, considered advisories issued by the Commissioner of Financial Regulation (Commissioner) on the subject of NOIs, as well as the purpose of the NOI requirement. The Court deferred to the Commissioner's interpretation, as expressed in an October 2011 advisory, that an NOI that has been sent to a borrower is not perpetually valid. The Court emphasized that the NOI is not a "blank check that . . . allow[s] a lender to initiate a foreclosure action against a borrower at any point in the future." (Slip op. at 23.) Rather, the NOI has a specific function, which is "to give borrowers an opportunity for loan modification and communication with the current lender before the . . . trustee files an order to docket." (Slip op. at 24). The Court concluded that "[a] lender who relies on an old, incorrect notice of intent to foreclose flouts [the statutory] requirement." (Slip op. at 27).
Since Wells Fargo did not file a petition for a writ of certiorari in the Court of Appeals within the timeframe required by the Maryland Rules, the Granados decision is settled law in Maryland.
The Commissioner recently promulgated changes to the residential mortgage foreclosure regulations and forms (see COMAR 09.03.12). The effective date for the changes was February 1, 2015. The Commissioner's advisory regarding the changes is available here.