Maryland’s In Rem Foreclosure Procedures

When There is Doubt About the Enforceability of a Purported Lien, Maryland’s In Rem Foreclosure Procedures do not Create a Presumption in Favor of Foreclosure

The Maryland Court of Special Appeals (the intermediate appellate court) ruled in favor of the CLC’s client in a wrongful foreclosure debt collection action. In Newsom v. Brock & Scott, PLLC, et al., the Court reversed the irregular rulings of the trial court that prevented Ms. Newsom from having a jury of her peers hear her unlawful debt collection and mortgage fraud claims against a debt collection law firm and its attorney designated to prosecute the improper foreclosure action.

Second, Newsom is the first substantive state court decision to analyze and apply the holdings of the recent opinions of the Court of Appeals in Nationstar Mortg. LLC v. Kemp, 476 Md. 149, 258 A.3d 296 (2021)(“Kemp II”) and Chavis v. Blibaum & Assocs., P.A., No. 30, SEPT. TERM, 2020, 2021 WL 3828655 (Md. Aug. 27, 2021)(“Chavis II”). In Newsom the appellate court largely adopted the CLC’s analysis of Kemp II and Chavis II as related to claims arising under the Maryland Consumer Debt Collection Act, COM. LAW 14-201, et seq. (“MCDCA”). It held that collectors seeking to collect under the in rem foreclosure rules may be acting with knowledge or reckless indifference of the right to collect when

(i) the alleged borrower never signed the purported lien;

(ii) the lien was unrecorded for years and no claim was ever filed in the alleged borrower’s estate within six months as required under Maryland law;

(iii) the collector performed no reasonable investigation of the facts known to it before commencing an in rem foreclosure;

(iv) the purported lien was defective and unenforceable as a matter of law;

(v) attorneys, like other collectors, who act recklessly to assert a right that turns out not to exists may be liable under the MCDCA; and

(vi) the MCDCA should be read broadly to apply to “any claim, attempt, or threat to enforce a right that the debt collector knows does not exist.” Newsom, Slip. Op. at 30-37. Neither may a law firm or a lawyer acting as collectors avoid a jury by asserting a ‘good faith’ defense after the fact. Newsom, Slip. Op. at 27-28.

While the Maryland Court of Appeals (the state supreme court) has previously recognized briefly that the Legislature “created a comprehensive mortgage fraud statute to protect homeowners in foreclosure,” Blackstone v. Sharma, 461 Md. 87, 139 (2018), no other state court published decision before Newsom subsequently addressed the MMFPA. Now, under Newsom, it is clear that persons like law firms and their attorneys who seek to collect with knowledge or reckless disregard of the right to do so, may be subject to and held accountable under the MMFPA.

Not every homeowner has a defense to a foreclosure. However, Newsom affirms that some homeowners subjected to unfair and deceptive practices by law firms and attorneys seeking to foreclose without the right through Maryland’s in rem procedures may have claims under the MCDCA and MMFPA. CLC is pleased that the court recognized that collectors seeking improper shortcuts should be held to the same standard as similar law-abiding collectors.