A decision by the Georgia Court of Appeals has added new language to a notice of foreclosure requirement case that, according to some analysts, could invalidate thousands of Georgia foreclosures.
The court recently ruled that when an agent or servicer of the secured creditor sends a notice of foreclosure to the borrower, the notice must identify the secured creditor.
According to an attorney with the mortgage banking group at Ballard Spahr familiar with the case, Georgia’s foreclosure notice statute requires servicers to deliver to the debtor a written notice of the foreclosure sale “by the secured creditor.”
However, it only required that the notice include the name, address and telephone number of the individual or entity “who shall have full authority to negotiate, amend and modify all terms of the mortgage with the debtor.”
The ruling could help increase foreclosure process transparency in a state that continues to have the nation’s third highest foreclosure rate behind Nevada and Arizona.
The decision was taken following an appeal to a lawsuit against Provident Funding. In Reese v. Provident Funding Associates LLP, the plaintiffs alleged that the notice of foreclosure sent by mortgage lender and servicer Provident Funding did not comply with the Georgia law.
The notice identified Provident as the “lender” and stated that Provident was authorized to negotiate, amend and modify the mortgage, explains Ballard Spahr associate, Sarah Reise, in a recent report.
What made the servicer liable, was the fact that Provident admitted that it did not hold the note evidencing the mortgage loan, Reise writes.
After funding the loan, Provident sold and transferred the note to another company but continued to service it on behalf of the new note holder.
Provident maintained that that the foreclosure notice complied with the law “because, as the servicer of the loan, Provident could properly send notice on behalf of the secured creditor.”
But the Court of Appeals found “the notice of foreclosure contained material misrepresentations because it falsely identified Provident as the secured creditor and failed to identify the third-party note holder as the true secured creditor.” The conclusion rules the foreclosure sale invalid.
Most importantly, according to Reise, the ruling may have a significant, and possibly unintended, impact on loans owed by Freddie Mac or Fannie Mae.
While the requirement that a notice of foreclosure identify the “secured creditor” is not particularly burdensome, she argues, it “does not appear in the plain language of the statute.” As a result, the decision “likely will make thousands of foreclosures susceptible to challenge.”
