September 9, 2013
by Dallas R. Ivey & Kimberly Rizzotti Weber
Aldridge Connors, LLP – USFN Member (Georgia)
The Georgia Supreme Court recently brought much needed clarity and guidance to lenders and servicers regarding notice requirements under Georgia foreclosure law in You v. JP Morgan Chase Bank, N.A., No. S13Q0040, 2013 WL 2152562 (May 20, 2013). In You, the court rejected the argument that O.C.G.A. § 44-14-162.2(a) requires foreclosure notices to identify the “secured creditor,” which is not defined by statute but has been uniformly considered to be the holder of the security deed. (See Reese v. Provident, 317 Ga. App. 353, 730 S.E.2d 551(2012); Stubbs v. Bank of America, 844 F. Supp. 2d 1267 (N.D. Ga. 2012)). Rather, the court held that the plain language of the statute requires only that the written notice identify “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.” You, 2013 WL at *6 (emphasis in original).
In the wake of You, borrowers have launched a new line of attack by challenging the scope of authority of the parties identified in foreclosure notices as having full authority to negotiate, amend, and modify the terms of the mortgage with the debtor (See Harris v. Chase Home Finance, LLC, 4:11-cv-00116-HLM (11th Cir., July 31, 2013); Fuentes v. JPMorgan Chase Bank, N.A., 1:13-cv-01649-CAP (N.D. Ga. 2013)). Specifically, borrowers contend that if an owner of a loan has servicing guidelines with its agent, then the agent has “limited authority” rather than “full authority” to negotiate with the debtor. Borrowers have made this argument concerning loans owned by Fannie Mae and Freddie Mac by asserting that these entities have retained the authority to modify terms and negotiate with borrowers by establishing such guidelines. By this logic, unless a servicer or agent has unlimited authority to unilaterally negotiate, amend, and modify the terms of a loan, then the owner/investor would have to be the entity required to be identified under the statute. This reasoning clearly fails to apply to the reality of the lending and servicing industry as owners/investors have internal policies, guidelines, and standards for loan modifications, and would therefore require that the owner/investor always be identified in foreclosure notices.
There are several ways to counter this interpretation of full authority including: (1) the clear language of the You holding and prior judicial decisions; and (2) authority and agency concepts. Notably, the Georgia Supreme Court held in You that the party with full authority can be the owner of the loan, the loan servicer, or even an attorney. See You, 2013 WL at *6.1 In addition, basic agency concepts suggest that “full authority” does not mean “unlimited authority.” By analogy, full settlement authority merely means that the individuals at a settlement conference must be authorized by the parties to both explore settlement options and to agree at that time to any settlement terms agreeable to the parties.
The clear intention of the notice requirements under Georgia’s foreclosure statutes is to provide a borrower seeking to modify the terms of a mortgage with sufficient contact information to enable such negotiations. Lenders and their agents can defend against attacks on foreclosure notices by: (a) being meticulous in preparing notices that clearly state the contact information of the servicing agent or other person with full authority to negotiate; and (b) familiarizing themselves with the holding and analysis of the Georgia Supreme Court in You.
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1Prior cases from the Georgia Court of Appeals held that notices that identified attorneys as having full authority were sufficient even where the attorneys lacked full authority to amend mortgage terms or had to consult with clients about modifications. See Stowers v. Branch Banking & Trust Company, 317 Ga. App. 893, 731 S.E.2d 367 (2012); TKW Partners, LLC v. Archer Capital Fund, L.P., 302 Ga. App. 443, 691 S.E.2d 300 (2010) (notice identified attorney without unlimited or plenary powers to negotiate loan terms). See also Carr v. U.S. Bank, NA, 2013 WL 4267640 (C.A. 11 (Ga.)).