By Santo Longo, Esq. and Shannon Merrill, Esq. of Bendett & McHugh, P.C.
Maine Legislative Session adjourned July 16, 2015 after well-publicized disputes between the legislature and Governor LePage. Once the dust settled from the various vetoes and overrides, several important default- and foreclosure-related measures were enacted. The following is a summary of the new laws, all of which become effective October 15, 2015.
Bank of America v. Greenleaf:
In July 2014, the Maine Supreme Judicial Court made several important changes and clarifications to Maine foreclosure law and practice in the landmark case Bank of America v. Greenleaf, 2014 ME 89. The case created uncertainty regarding property title issues, and also regarding the pre-foreclosure notification letters that foreclosing lenders and investors must provide to borrowers. Two new laws were passed to address these uncertainties:
- Standing to Foreclose and MERS: Statutory changes codified at 33 M.R.S.A. § 508 create a presumption that a mortgage assignment, partial release, or discharge executed by a party acting as nominee for another party is valid. This includes mortgage-related instruments executed by Mortgage Electronic Registration Systems, Inc. (“MERS”) when acting as nominee for lenders. Importantly, in regard to assignments of mortgage specifically, the presumption of validity only applies in the context of foreclosure actions if the judgment of foreclosure is obtained and the applicable appeal period has run without an appeal being filed as of October 15, 2015, the effective date of the Act. This limits the cloud on property titles caused by the high court’s holdings in the Greenleaf case to only those property titles affected by assignments of mortgage. Fortunately, the new law does remove any doubt as to the validity of mortgage discharges and releases executed by MERS.
- Notice to Cure Requirements: New provisions in Maine’s notice of default statute (14 M.R.S.A. § 6111) require that the pre-foreclosure notification letters sent to borrowers specifically state that the amount needed to cure the default does not include any amounts that will become due after the date of the notice itself.
Municipal Action Regarding Abandoned Properties:
A new law authorizes Maine municipalities to issue a finding that real property, or a mobile home, is “abandoned,” and then order the property owner(s) to address identified conditions at the property. If the property owner fails to comply, the municipality can perform the work itself and seek reimbursement from the owner. The Act further requires a mortgagee, when initiating a foreclosure action, to provide the municipality with the contact information of an in-state representative for the purposes of receiving communications from the municipality regarding property abandonment issues.
Under the new law, when title to real property in Maine is transferred pursuant to a foreclosure judgment, the new owner becomes subject to orders to correct property conditions, as well as potential liability and enforcement. This includes foreclosing lenders who take title at foreclosure sales and hold properties in REO portfolios. Because of the potential costs and liabilities posed by this new law, foreclosing lenders will need pay close attention to property conditions, safety concerns, and related issues associated with abandoned properties they may acquire ownership of through foreclosure.
Expediting Final Foreclosure Hearings:
New legislation will permit foreclosing lenders to request an expedited final hearing in cases where either: (1) efforts to mediate did not result in settlement or dismissal of the action, and any party that has appeared in the action consents to the request; or (2) the defendant did not answer the complaint and any appearing party consents. Once the court receives the request, the court will, “as the interests of justice require,” schedule the final hearing within 45 days from the date the request is filed. The burden of proof and statutory requirements for entry of a foreclosure judgment remain the same.
Certification of Proof of Ownership Required:
Beginning October 15, 2015, foreclosure complaints must contain a certification of proof of ownership of the defaulted loan. This change specifically requires that the name of the owner of the loan is disclosed in the complaint that is filed at the initiation of a foreclosure action. In a case where a loan servicer is bringing the foreclosure action in the servicer’s name and on behalf of the lender or investor that owns the loan, the identity of that lender or investor will need to be identified.
Because of the limitations contained in the statute, it appears that use of the new expedited hearing process will largely be limited to default cases with no parties in interest actively contesting the foreclosure. The purpose of this legislation is to encourage judicial efficiency in foreclosure actions and to reduce the overall timeline of unopposed foreclosure actions in Maine.
Power of Sale Foreclosure:
New legislation modifies Maine’s non-judicial foreclosure process. This process allows mortgagees to proceed directly to sale in certain cases where specific statutory requirements are met, and is generally only available in cases involving commercial properties. The changes are largely procedural, not substantive. Specifically, the archaic requirement that notices must be sent by “registered mail” has been updated to a more commercially reasonable “certified mail” requirement. The bill also eliminates the requirement that post-sale, a petition must be filed with the Maine Superior Court to correct a purely typographical error or omission in the final vesting documents.
Maine Fair Debt Collection Practices
Maine’s debt collection practices statute underwent amendment this session as well, despite opposition and a veto from the Governor. The new amendments require that any payment arrangement entered into with a debt collector must be documented and approved by the court or reduced to writing. (See 32 MRSA §§ 11012; 11013). In addition, the amendments prevent a debt collector from bringing an action against a consumer if the statute of limitations on the collection action has expired, and also provide that once the statute of limitations has run on an action to collect a debt, a new window within which suit can be brought is not opened if the consumer makes a payment or takes other action regarding the underlying debt.
These changes are meant to address the perception that, at times, suspicious collection practices have been undertaken by debt collectors who have purchased previously charged off debts. The original bill was much more aggressive in its attempts to raise the burden of proof that must be met by a debt collector attempting to enforce a debt if the debt collector is not the original creditor.
The end result of the recent changes to Maine’s debt collection statute is that they will likely reduce debt collection actions brought by debt purchasers against consumers who are unaware that the statute of limitations on the collection of the debt has expired.
For additional information on the new laws discussed above, you may contact the authors directly. Santo Longo: firstname.lastname@example.org and Shannon Merrill: email@example.com.