Permitted Defenses and Issues

• Jurisdiction: Maryland

IV. PERMITTED DEFENSES AND ISSUES

There are several ways under which a foreclosure action can be delayed or come under scrutiny or attack once filed. First, a qualifying borrower has a right, under certain circumstances, to request to participate in post-filing mediation, if pre-filing mediation did not occur.⁵⁸ Second, the borrower, and certain other parties, have two methods of directly challenging the validity of the foreclosure action: (1) obtaining a pre-sale injunction and/or filing a motion to dismiss pursuant to MD. RULE 14-211 and (2) filing post-sale exceptions to the ratification of a sale pursuant to MD. RULE 14-305(d).⁵⁹ Third, the circuit court itself has the right to screen the pleadings and papers filed in the foreclosure action for legal compliance and issue appropriate orders pursuant to MD. RULE 14-207.1. Fourth, the borrower can attempt to seek review and modification of the order ratifying the foreclosure sale once it has been entered and enrolled pursuant to MD. RULE 2-535.⁶⁰

A. Mediation Requests

The right to request post-file mediation is available to a mortgagor or grantor of the secured property who has not participated in prefile mediation or who has entered into a prefile mediation agreement that gives him the right to also participate in postfile mediation.⁶¹ The property must be owner occupied, and the mediation request must be filed with the circuit court within 25 days after service of the final loss mitigation affidavit, accompanied by the required filing fee or a request to reduce or waive the filing fee, and a copy must be mailed to the foreclosure attorney.⁶² If the request is late, or if the property is not owner occupied, the secured party may, within 15 days of service of the request, file a motion to strike the mediation request that must be supported by an affidavit setting forth the reasons why postfile mediation is not appropriate.⁶³ A presumption will exist that a mortgagor or grantor is entitled to postfile mediation with respect to owner occupied property unless good cause is shown as to why it is not appropriate.⁶⁴ The person requesting the mediation has 15 days to respond to any motion to strike the request.⁶⁵ The circuit court can thereafter rule on the motion, with or without a hearing.⁶⁶

Once a mediation request is made, the circuit court will transmit the request to the Office of Administrative Hearings, which will schedule a mediation session within 60 days after the request was transmitted.⁶⁷ The time for completing the mediation can be extended for 30 days by the Office of Administrative Hearings for good cause, or for a longer period of time if the parties so agree.⁶⁸

Practically, issues will occur when a mediation request is made more than 25 days after the Final Loss Mitigation Affidavit was served, and after the sale has already been scheduled to occur. It is at this point that the secured lender has begun to incur costs and fees associated with the scheduling of the foreclosure sale, and a motion to strike the mediation request may be appropriate so that those fees and costs will not go to waste. There are also instances when a person submits an untimely mediation request that results in a mediation being scheduled after the occurrence of a foreclosure sale, which creates additional practical difficulties, as at the time of the mediation the borrower's right of redemption for the property will already have been extinguished, and the loss mitigation options available may become limited to discussing an agreement to vacate the property, or entirely eliminated if the property has been sold at foreclosure to a third party purchaser who is not required to participate in the mediation session.

If a timely mediation request is made, a foreclosure sale cannot be scheduled until the mediation is concluded without an agreement having been reached, or if the 60-day mediation period has expired without any extension having been granted to either party.⁶⁹ Once the mediation is completed, the mediator, who will be an administrative law judge assigned by the Office of Administrative Hearings, will file a report with the circuit court indicating the results of the mediation. Once the report has been filed, some circuit courts will enter an order allowing the foreclosure to proceed, even though such an order is not required by any law, rule, or statute. Nonetheless, when a mediation has been requested and no motion to strike is planned to be filed, a trustee should place the foreclosure on hold and not proceed with scheduling a sale until the mediation process has been completed.

B. Deficiency Orders Issued by the Circuit Court

The circuit court has the power to screen the pleadings, papers, and affidavits filed in connection with a foreclosure action pursuant to MD. RULE 14-207.1:

(a) Generally. The court may adopt procedures to screen pleadings and papers filed in an action to foreclose a lien. If the court determines that the pleadings or papers filed do not comply with all statutory and Rule requirements, it may give notice to the plaintiff and each borrower, record owner, party, and attorney of record that the action will be dismissed without prejudice or that some other appropriate order will be entered by reason of the non-compliance if the plaintiff does not demonstrate within 30 days that the papers are legally sufficient or that the deficiency has been cured.

Committee note: This Rule prevails over the provision in Rule 1-321(a) or any other Rule that purports, where a party is represented by an attorney, to permit service on only the attorney. This Rule requires service on both.

(b) Review of Affidavits.

(1) In this section, "affidavit" includes any attestation or certification by an attorney, borrower, record owner, party, or agent of the attorney, borrower, record owner, or party concerning the truth or accuracy of a pleading or paper.

Cross reference: See Rule 1-202(b) for a general definition of "affidavit."

(2) If the court has reason to believe that an affidavit filed in the action may be invalid because the affiant has not read or personally signed the affidavit, because the affiant does not have a sufficient basis to attest to the accuracy of the facts stated in the affidavit, or, if applicable, because the affiant did not appear before the notary as stated, the court may order the party to show cause why the affidavit should not be stricken, and, if it is stricken, why the action should not be dismissed or other relief granted.

(3) As part of the show cause order, the court may order that the affiant and any notary appear before the court at a time stated in the order for the affiant to attest under penalty of perjury that the affiant read and personally signed the affidavit and had a sufficient basis to attest to the accuracy of the facts stated in the affidavit, and, if applicable, for the affiant and the notary to attest that the affiant appeared before the notary and made the oath stated.

(4) A copy of the order shall be sent to the plaintiff and to each borrower, record owner, party, and attorney of record, together with a notice that they may appear and examine the affiant and notary. The court may further require that the plaintiff serve the order and any response thereto on each borrower, record owner, party, and attorney of record.

Cross reference: See Rule 1-341.

(c) Special Magistrates or Examiners. The court may designate one or more qualified Maryland lawyers to serve as a part-time special magistrate or examiner to screen pleadings and papers under section (a) of this Rule, conduct proceedings under section (b) of this Rule, and make appropriate recommendations to the court. Subject to section (d) of this Rule, the costs and expenses of the special magistrate or examiner may be assessed against one or more of the parties pursuant to Code, Courts Article, § 2-102(c), Rule 16-807 (b), or Rule 16-808 (b). With his or her consent, the special magistrate or examiner may serve on a pro bono basis.

(d) Assessment of Costs, Expenses, and Attorney's Fees. The costs, expenses, and attorney's fees of any proceeding under this Rule, including any costs or expense of a special magistrate or examiner under section (c) of this Rule, shall not be assessed against the borrower or record owner either directly or as an expense of sale, unless the affidavit in question was filed by or on behalf of the borrower or record owner.

Committee note: The exercise of the authority granted in this Rule is discretionary with the court. Nothing in this Rule precludes the court from using its own personnel for these purposes.

This rule was adopted on an emergency basis on October 20, 2010. According to the Rules Committee's 166th Report, Rule 14-207.1 was enacted to clarify a circuit court's ability to screen its foreclosure dockets in light of revelations that affidavits contained therein may have been signed without sufficient knowledge of the facts averred to, or without having first been personally read by the signor. Rule 14-207.1 was amended on January 1, 2016, to change the term "master" to "magistrate," and also on August 1, 2020, to update obsolete cross references to other rules contained therein.

The rule "contemplates an opportunity for the foreclosing party to remedy the deficiency within 30 days."⁷⁰ Other than that simple statement, the rule has only otherwise been examined by the Court of Appeals on one occasion as of time of publication, in 101 Geneva LLC v. Wynn, 435 Md. 233, 77 A.3d 1064 (2013).

In 101 Geneva, following a foreclosure sale and before ratification, the circuit court judge issued a deficiency order pursuant to its authority under Rule 14-207.1 (a), regarding a fee contained in the advertisement of sale. Responses to the deficiency order were filed, and a hearing occurred, at which the judge assigned to that hearing held that she was constrained to rescind the sale and order a resale because, despite legitimate arguments advanced...