Troutman Sanders wins trial on claim to set aside foreclosure sale
On June 7, 2013, the U.S. District Court for the Northern District of Georgia refused to set aside a non-judicial foreclosure sale after a bench trial on issues relating to alleged defects in the foreclosure notice, resulting in a complete victory for the defendants. The district court’s decision extends the Georgia Supreme Court’s opinion in You v. JPMorgan Chase Bank, N.A. by holding that disclosure of the loan servicer as the entity with the authority to modify the loan complies with the foreclosure notice statute. Rainey v. FMF Capital, LLC, et al., No. 1:11-cv-00364-CAP (N.D. Ga. June 7, 2013) (Pannell, J.).
In Rainey, GMAC Mortgage, LLC (GMACM) conducted a non-judicial foreclosure pursuant to a power of sale in the plaintiffs’ security deed after the plaintiffs failed to cure their default under a residential mortgage loan. The foreclosure notice identified Defendant GMACM as the “servicer” and Defendant Mortgage Electronic Registration Systems, Inc. (MERS), the holder of the security deed, as the “creditor.” Pursuant to Georgia law, the notice included a copy of the advertisement to be published during the four weeks prior to the sale, which also identified GMACM and MERS as “servicer” and “creditor,” respectively. However, after the first two weeks of publication, the advertisement was amended to indicate that MERS was acting as nominee for the original lender, FMF Capital. No copy of the amended advertisement was sent to the plaintiffs.
At trial, the plaintiffs argued that the sale should be set aside because the notice violated Georgia’s foreclosure statute in two respects: (1) it failed to identify the true “secured creditor” and (2) it did not include a true “copy” of the advertisement.
Following trial, the Court held that the notice complied with Georgia’s foreclosure statute. Citing the Georgia Supreme Court’s recent decision in You v. JPMorgan Chase Bank, N.A., No. S13Q0040, 2013 Ga. LEXIS 454 (Ga. May 20, 2013), the Court found that the notice properly identified GMACM, the loan servicer, as the party with “authority to negotiate, amend, or modify the mortgage” as required by O.C.G.A. § 44-14-162.2. The Court also found that the notice was not defective because the variation between the original and amended advertisements had no bearing upon the plaintiffs’ notice of the sale.
The Rainey decision represents another important victory for lenders and foreclosing parties in Georgia. Significantly, Rainey goes beyond You’s dicta concerning whether a loan servicer may be the proper party to identify as the entity with authority to modify the loan, to hold that disclosure of the loan servicer, GMACM, did comply with the foreclosure statute. In addition, the court’s conclusion that the discrepancy in the notice and advertisements did not compromise the plaintiffs’ actual notice of the sale will prove useful in establishing “substantial compliance” with the statute where borrowers cannot show that an alleged defect in the foreclosure notice deprived them of actual notice of the sale.
A copy of the Court’s order is attached here. Rainey v. FMF Capital, LLC, et al., No. 1:11-cv-00364-CAP (N.D. Ga. June 7, 2013) (Pannell, J.).
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