GA Appeals Court Opinion – Reese v. Provident
On May 5, the Georgia Court of Appeals issued its second opinion in Reese v. Provident Funding Assocs., LP, ___ S.E.2d ____, No. A12A0619, 2014 WL 1758895 (Ga. Ct. App. May 5, 2014) (“Reese II”). This case concerned the application of O.C.G.A. § 44-14-162.2, which requires all foreclosure notices to “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 . . . .” This provision has sparked a flood of litigation from borrowers who attempt to state claims for wrongful foreclosure based on the named entity allegedly not having the requisite “full authority.”
The original opinion, issued on July 12, 2012, held that Provident Funding, the servicer of the loan on behalf of Residential Funding Corporation, violated this portion of the statute by identifying itself as the entity with such authority. Reese v. Provident Funding Assocs., 730 S.E.2d 551 (Ga. Ct. App. 2012). The Court of Appeals held this to be a “material misrepresentation” because “although the notice disclosed that Provident had the ‘authority to negotiate, amend and modify all terms of the Note and Security Deed,’ such is materially different from disclosing that the loan servicer has full authority to modify on behalf of a creditor within whatever guidelines that creditor may have imposed.” The Court of Appeals also held that the foreclosure notice was invalid because Provident identified itself as the “secured creditor” despite not having any interest in the promissory note.
Provident sought a writ of certiorari from the Georgia Supreme Court, which was granted on May 20, 2013. See No. S12C2028 (Ga. May 20, 2013). The opinion of the Court of Appeals was summarily vacated and remanded with direction for the Court of Appeals to reexamine the case in light of the decision in You v. JP Morgan Chase Bank, 743 S.E.2d 428 (Ga. 2013). In You, the Supreme Court held that: 1) a foreclosing entity that identifies itself as the “secured creditor” needs only to be the grantee or assignee of a security deed to foreclosure and does not need to have any beneficial interest in the promissory note; and 2) with respect to the entity with full authority to modify, “if that individual or entity is the holder of the security deed, then the deed holder must be identified in the notice; if that individual or entity is the note holder, then the note holder must be identified. If that individual or entity is someone other than the deed holder or the note holder, such as an attorney or servicing agent, then that person or entity must be identified. The statute requires no more and no less.” However, the Supreme Court did not give any guidance on what constitutes “full authority.”
In Reese II, the Court had to reconsider “whether Provident, as the Reeses’ loan servicer, had authority to negotiate, amend and modify all terms of their mortgage.” The Court of Appeals did not provide any recitation of the evidence that was in the record regarding Provident’s authority or otherwise state any facts about the extent of their authority, and simply held as follows:
Contrary to the Reeses’ contention, Provident complied with OCGA § 44–14– 162.2 because Provident sent the Reeses a notice of foreclosure more than 30 days before the nonjudicial foreclosure sale and the notice specifically informed the Reeses that Provident had authority to negotiate, amend and modify all terms of their Note and Security Deed. See You, supra, 293 Ga. at 74–75(2), 743 S.E.2d 428. Accordingly, the trial court did not err in finding that the foreclosure notice satisfied the requirements of OCGA § 44–14–162.2.
While the decision is certainly promising for creditors (and has already generated a lot of buzz in the legal community), it is difficult to know how, or if, this will change the landscape of foreclosure challenges in Georgia given the limited analysis by the Court of Appeals. It appears that the Court held that any loan servicer can be appropriately named as the entity with “full authority,” but without any knowledge of the evidence presented by Provident to prove its authority, it is not possible to determine the scope and impact of this decision. Rubin Lublin, LLC will continue to monitor all of the developments in this area and keep you apprised of any changes.