Kemp v. Nationstar Mortg. Ass'n

248 Md.App. 1

239 A.3d 798

Donna KEMP

v.NATIONSTAR MORTGAGE ASSOCIATION d/b/a Mr. Cooper, as Successor By Merger To Seterus, Inc., et al.

No. 2652, Sept. Term, 2018

Court of Special Appeals of Maryland.

October 1, 2020

Argued by Phillip R. Robinson (Consumer Law Center, LLC, Silver Spring, MD, Scott C. Borison, Legg Law Firm, LLP, Baltimore, MD), all on the brief, for Appellant.

Argued by Marc A. Marinaccio (Hogan Lovells US LLP, on the brief), Baltimore, MD, for Appellee.

Fader, C.J., Nazarian, James A. Kenney, III (Senior Judge, Specially Assigned), JJ.

Nazarian, J. Donna Kemp obtained a mortgage loan from Countrywide Home Loans, Inc., ("Countrywide") that later was assigned to the Federal National Mortgage Association ("Fannie Mae"). In 2017, Ms. Kemp fell behind on her payments and the loan servicer, Seterus, Inc. ("Seterus"),¹ declared the loan in default.

Ms. Kemp exchanged correspondence with Seterus and, among other things, learned that Seterus had charged her $180 for twelve property inspections that it ordered after she defaulted. In November 2017, Seterus offered (on Fannie Mae's behalf) and Ms. Kemp accepted a loan modification, and some or all of the property inspection fees were rolled into the balance of the loan.

In December 2017, Ms. Kemp filed suit against Fannie Mae and Seterus on behalf of herself and a class. She alleged that Section 12-121 of the Commercial Law Article ("CL"),² which prohibits a "lender" from imposing a property inspection fee "in connection with a loan secured by residential property," barred Seterus from charging property inspection fees. The Second Amended Complaint (the "Complaint") asserts five state law counts, all derived to one degree or another from Seterus's alleged violation of CL § 12-121 : (1) a claim for statutory damages under CL § 12-114 ; (2) a claim for declaratory judgment and injunctive relief; (3) a common law claim for unjust enrichment; (4) violations of the Maryland Consumer Debt Collection Practices Act ("MCDCA"), CL §§ 14-201 et seq. , and a derivative claim under the Maryland Consumer Protection Act ("MCPA"), CL § 13-301(14) ; and (5) a claim based on violations of the Maryland Mortgage Fraud Protection Act ("MMFPA"), §§ 7-401 et seq of the Real Property Article ("RP").

At all relevant times, the applicable statute defined a "lender" as a person who "makes" loans. Md. Code (1975, 2013 Repl. Vol.), CL § 12-101(f). Fannie Mae and Seterus moved to dismiss, contending that they aren't "lenders" and that CL § 12-121 doesn't preclude them from charging inspection fees.

The circuit court agreed and dismissed the Complaint primarily on that ground. We agree with Ms. Kemp that Fannie Mae and Seterus's construction would defeat the broader statutory purpose and lead to absurd results, and we hold that CL § 12-121 applies to assignees. In addition, we (1) hold that the circuit court erred in finding that Seterus waived or paid the property inspection fees in the course of modifying Ms. Kemp's loan; (2) affirm the dismissal of the MCDCA and derivative MCPA claims; (3) hold that Ms. Kemp did not preserve her argument that the Complaint supports a standalone MCPA claim; and (4) hold that Ms. Kemp waived her challenge to the circuit court's conclusion that the Complaint failed to state her MMFPA claim with particularity. All told, we reverse in part, affirm in part, and remand to the circuit court for further proceedings consistent with this opinion.

I. BACKGROUND

Because this case was decided on a motion to dismiss, we take the well-pleaded allegations as true for purposes of our analysis, and we recount them here as alleged.

When Ms. Kemp bought her home in Glen Burnie in April 2007, she obtained a loan from Countrywide. At some point after closing, the loan was assigned to Fannie Mae. Fannie Mae conducts its business by "routinely acquir[ing] loans from others who extend on its behalf and in accordance with its guidelines" and "publish[ing] forms, guidelines, and more for persons to use when arranging sales of loans to Fannie Mae ...." The Deed of Trust she signed was "the standard and uniform Fannie Mae Deed of Trust ...."

In 2017, Ms. Kemp fell behind on her payments. Seterus, which serviced the loan on behalf of Fannie Mae at all relevant times, declared the loan in default in April of that year. Ms. Kemp wrote to Seterus on or about July 14, 2017 and asked for more information about her loan. Seterus responded on or about July 24, 2017 and, among other things, informed her that "property preservation charges" had been assessed between August 26, 2016 and July 24, 2017. In another letter dated July 20, 2017, Seterus offered Ms. Kemp a trial plan for a loan modification that required Ms. Kemp to make three payments on September 1, October 1, and November 1. Ms. Kemp accepted the trial plan and made those payments.

Ms. Kemp wrote to Seterus again on September 6, 2017 requesting additional information, including information about the property preservation charges. In a September 25, 2017 letter, Seterus represented that she owed $180 in property inspection fees that would be included as part of a " ‘payoff total.’ " In a September 26, 2017 letter, Seterus again represented that it had charged Ms. Kemp $180 for twelve property inspections conducted after Ms. Kemp's default. Seterus averred that the inspections were "drive-by Inspections to see if the property was occupied and in good repair" and were authorized by the Deed of Trust, which states that the lender may charge fees to the borrower for services including "property inspection" "performed in connection with" the borrower's default. The Deed of Trust also prohibits the lender from charging fees prohibited by law:

Lender may charge Borrower fees for services performed in connection with Borrower's default , for the purpose of protecting Lender's interest in the Property and rights under this Security Instrument, including, but not limited to, attorneys' fees, property inspection and valuation fees . In regard to any other fees, the absence of express authority in this Security Instrument to charge a specific fee to Borrower shall not be construed as a prohibition on the charging of such fee. Lender may not charge fees that are expressly prohibited by this Security Instrument or by Applicable Law.

(emphasis added).

In November 2017, Seterus, on behalf of Fannie Mae, offered Ms. Kemp a loan modification. She accepted the offer and made the modified mortgage payments. She alleges that the property inspection fees were added to the loan balance; she has paid some of the property inspection fees to Seterus through her payments during the trial period and after the loan modification but hasn't paid them in full because they were capitalized to her mortgage account, and the loan is not yet paid off.

In December 2017, Ms. Kemp filed this putative class action, which included a claim under the federal Truth in Lending Act, 15 U.S.C. §§ 1601 et seq . The defendants removed the case to the United States District Court for the District of Maryland. In June 2018, the U.S. District Court granted the defendants' motion to dismiss the federal claim and remanded the action to state court.

In July 2018, the defendants moved to dismiss the remaining claims, and the circuit court heard oral argument on September 13, 2018. The court granted the defendants' motion to dismiss with prejudice in a memorandum opinion and order dated October 12, 2018. Ms. Kemp appealed. The issues are altogether legal, and we'll address them and any additional facts below.

II. DISCUSSION

Ms. Kemp raises three Questions Presented, but they all boil down to whether the circuit court erred in dismissing the case.³ The operative Complaint contained five counts asserting state law claims, all of which depend on whether the prohibition in CL § 12-121 against property inspection fees applies to Seterus (a loan servicer) or Fannie Mae (the assignee of the mortgage):

• A claim against Fannie Mae and Seterus under CL § 12-121, on behalf of Ms. Kemp individually and a class, including a request for statutory damages under CL § 12-114(b), which provides for the forfeiture of the greater of three times the amount collected or $500 (Count IV);

• A request for declaratory judgment that, under CL § 12-121, Fannie Mae and Seterus "are not entitled to charge and/or collect lender's inspection fees in connection with the loans of the State Law Class members and [Ms. Kemp] which are secured by residential real property," including a request that Fannie Mae and Seterus be enjoined from doing so and a request that Seterus "disgorge all inspection costs and fees it has collected" from Ms. Kemp or the class members (Count I);

• An unjust enrichment claim against Seterus alleging that Seterus "knowingly and willfully" demanded and received benefits in the form of property inspection fees that were prohibited by CL § 12-121 (Count II);

• A claim against Seterus for violation of the Maryland Consumer Debt Collection Practices Act, CL §§ 14-201 et seq. ("MCDCA") and a derivative claim under the Maryland Consumer Protection Act, CL §§ 13-301 et seq. ("MCPA"), based on Seterus's communications and correspondence with Ms. Kemp and class members in attempting to collect lender's inspection fees that were prohibited by CL § 12-121 (Count III); and

• A claim against Seterus under the Maryland Mortgage Fraud Protection Act (Md. Code, §§ 7-401 et seq. of the Real Property Article ("RP")) ("MMFPA") based on Seterus's assertions that property inspection fees were legal under Maryland law, when they were prohibited by CL § 12-121. (Count V).

In reviewing a circuit court's decision on a motion to dismiss, our task is to "determine whether the court was legally correct." RRC Ne., LLC v. BAA Md., Inc. , 413 Md. 638, 644, 994 A.2d 430 (2010). "[W]e assume the truth of all well-pleaded facts in the complaint and reasonable inferences drawn therefrom," and we "consider those facts and inferences in...