The Georgia Supreme Court on Monday, May 20th, vacated the controversial and troublesome decision of the Georgia Court of Appeals in Reese v. Provident Funding Associates, LLP. In Reese, the Court of Appeals had found that a foreclosure notice was required to identify the secured creditor AND the person with full authority to negotiate terms of any modification of the loan (even though the language of the statute only required the person with full authority to negotiate be listed in the notice). The Court of Appeals found that a notice that did not correctly identify the secured creditor was false and misleading and therefore not effective notice. The Court of Appeals went even further and declared that whether the foreclosure notice was false and misleading due to a failure to properly identify the secured creditor was not a factual question, but rather was a question of law which could be decided through summary judgment. The Court of Appeals, finally, left unanswered the question of whether its decision in Reese was retroactive. Thus, lenders and those engaged in foreclosures were presented with a “perfect storm” whereby they were liable as a matter of law for foreclosure notices sent before the Court of Appeals had declared what information the foreclosure notice was required to contain.
The Court of Appeals decision in Reese also led to problems in foreclosures where the Note had been assigned to the Federal National Mortgage Association (FNMA or “Fannie Mae”) or some other federal agency. This problem was compounded where the Deed to Secure Debt was recorded in the name of the Mortgage Electronic Registration System (MERS) as nominee for the original lender. Thus, the question being asked by foreclosing attorneys and in litigation by debtors’ attorneys was “Now that we are required to identify the secured creditor, who exactly IS the secured creditor among the four possible choices (the lender, the servicer, FNMA and MERS)?”
At the same time, the federal courts had developed a split over the same questions. The federal judges requested that the Georgia Supreme Court provide an interpretation of Georgia law to resolve their difference of opinion. This request came in the form of a certified question in the case of You v. JP Morgan Chase Bank. Since You was certified to the Georgia Supreme Court before the Georgia Supreme Court had even agreed to hear the Reese appeal, most observers expected the answers to the certified questions in You to resolve the issues in Reese. That is exactly what ended up happening. The Supreme Court answered the certified questions in You, granted certiorari in Reese, vacated the Court of Appeal’s judgment in Reese and then remanded Reese back to the Court of Appeals for proceedings consistent with the Georgia Supreme Court’s opinion in You.
The Georgia Supreme Court answered the first certified question that the holder of the deed to secure debt according to the public records is the secured creditor and is therefore authorized to conduct the foreclosure. Thus, the holder of the deed to secure debt according to the public records is allowed to conduct the foreclosure regardless of whether the Note has been assigned to FNMA or some other federal agency.
The Georgia Supreme Court answered the second certified question that there was no requirement in the statute that the secured creditor be specifically identified in the foreclosure notice. Thus, the Court of Appeals decision in Reese was overruled. The Georgia Supreme Court found no requirement in the statute that the foreclosure notice specifically identify the secured creditor. The Georgia Supreme Court also confirmed in a footnote that there was no requirement that the actual words “secured creditor” be used in the foreclosure notice.
When a higher appellate court restores the law to what it was before a lower appellate court intervened, commentators rarely if ever refer to that ruling as a “landmark decision.” However, considering the astounding number of unintended consequences that the Reese decision created, Monday, May 20, 2013 will stand as a landmark day of clarity for those engaged in foreclosures.
Provident Funding Associates, LLP v. Reese (Supreme Court of Georgia, Case No. S12C2028, Decided May 20, 2013)
You v. JP Morgan Chase Bank (Supreme Court of Georgia, Case No. S13Q0040, Decided May 20, 2013)