Georgia Court of Appeals Rules that Foreclosure Notice Must Include “True Identity of the Secured Creditor”
In a case of first impression, the Georgia Court of Appeals, by a 4-3 majority, ruled that notices of foreclosure must include the “true identity of the secured creditor.” This constitutes a new foreclosure requirement under Georgia law that will significantly impact the ability of creditors to enforce their liens, and it has the potential to invalidate foreclosures that do not meet this requirement.
In Reese v. Provident Funding Associates, No. A12A0619, 2012 Ga. App. LEXIS 666 (Ga. Ct. App. July 12, 2012), the Court held that every foreclosure notice accurately identify the secured creditor. A copy of the Court’s opinion is attached for your reference. Troutman Sanders LLP was not involved in the litigation.
Georgia’s foreclosure notice statute provides:
Notice of the initiation of proceedings to exercise a power of sale in a mortgage, security deed, or other lien contract shall be given to the debtor by the secured creditor no later than 30 days before the date of the proposed foreclosure. Such notice shall be in writing, shall 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[.]
OCGA § 44-14-162.2(a).
In Reese, the notices sent to the plaintiffs did not identify the secured creditor, but they did provide the name and contact information for the loan servicer. The notices, however, misidentified the loan servicer as the lender and holder of the note. The plaintiffs filed a claim for wrongful foreclosure on the ground that the notices were deficient because they did not divulge the name of the secured creditor.
Lower courts throughout Georgia have held that disclosure of the identity of the loan servicer, which has authority to negotiate, amend, and modify the loan terms, is sufficient to comply with Georgia’s statutory notice requirements. However, the Georgian Court of Appeals ruled that the notice needs to provide more than the name and contact information of the entity with authority to negotiate, amend, and modify the loan terms.
The Court found the language in the statute that a foreclosure notice be sent “by the secured creditor” to be ambiguous, and the Court looked to the legislative intent underlying a 2008 amendment to the statute, which added the language at issue. Notably, the Court heavily relied on U.S. District Judge Totenberg’s analysis in Stubbs v. Bank of America, No. 1:11-CV-1367-AT, 2012 U.S. Dist. LEXIS 19846 (N.D. Ga. Feb. 16, 2012), which the Court found to be “compelling.” In Stubbs, the Court stated that the overarching concerns behind the amendment were to promote transparency in the foreclosure process and to ensure the integrity of Georgia’s land records. Based on this reasoning, the Court of Appeals held that the statute required disclosure of the secured creditor.
In a strong dissent, three judges stated that the statute was not ambiguous and therefore legislative intent was irrelevant. The dissent stated that the majority’s opinion and Judge Totenberg’s decision in Stubbs “amount to a judicial rewriting” of the statute. The dissent further noted that the Ga. General Assembly proposed to amend the statute in 2008 to require the notice to include the “identity of the secured creditor,” but that the language was removed prior to passage of the amendment.
The Court’s opinion in Reese may have wide implications for Georgia foreclosures. In light of Reese, foreclosure counsel will need to insure that foreclosure notices provide the name of the secured creditor and holder of the note, in addition to the loan servicer, in order to thwart claims for wrongful foreclosure based on deficient statutory notice.
Troutman Sanders Financial Services Litigation and Regulatory Compliance Team
Troutman Sanders’ Financial Services Litigation and Regulatory Compliance Team is an accomplished and experienced leader in providing litigation and regulatory advice to a broad spectrum of financial services institutions. Our team is comprised of a dedicated group of trial and regulatory lawyers who regularly focus on resolving the array of issues which confront financial institutions. Our lawyers have years of hands-on successful experience in all areas of the trial process, including motions, arbitration, mediation, trial and appeal, coupled with in-depth banking industry and regulatory knowledge.
© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result. Follow Troutman Sanders on Twitter.