Nationstar Mortgage v. Kemp
258 A.3d 296
Md.2021Background
- Donna Kemp refinanced her home in 2007; the deed of trust named Countrywide as lender. The loan was later assigned to Fannie Mae; Nationstar (originally Seterus) serviced the loan for Fannie Mae.
- Kemp defaulted; Nationstar assessed periodic property inspection (preservation) fees and capitalized them into a later loan modification.
- Kemp sued Fannie Mae and Nationstar in state court asserting, inter alia, that the fees violate Maryland’s usury/inspection-fee statute (CL §12-121) and that Nationstar’s attempts to collect the fees violate the Maryland Consumer Debt Collection Act (MCDCA, CL §14-202(8)).
- The circuit court dismissed the state-law counts; the Court of Special Appeals reversed in part (holding §12-121 applies to assignees) but affirmed dismissal of the MCDCA claim. Both parties sought certiorari.
- The Court of Appeals held that the code-revision definition of “lender” did not abrogate the common-law rule that an assignee “steps into the shoes” of the originator; CL §12-121 therefore applies to assignees and servicers, and Kemp adequately pleaded a MCDCA claim (claiming a right with knowledge it did not exist).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CL §12-121’s ban on "lender’s inspection fees" applies to an assignee/servicer | Kemp: §12-121 prohibits inspection fees during the life of the loan and applies to assignees/servicers; the statute should be harmonized with common-law assignment | Nationstar/Fannie Mae: definition of “lender” (CL §12-101(f): “person who makes a loan”) excludes assignees/servicers, so §12-121 does not apply | Held: §12-121 applies to assignees and servicers; the 1975 code revision definition did not change the common-law assignment rule |
| Whether the code-revision definition of “lender” abrogated common-law assignment or narrowed the Usury Law | Kemp: code revision was not intended to change substance; definition was stylistic and limited to the subtitle | Nationstar: definition narrows “lender” to originators, creating a gap that excludes assignees from many Usury Law obligations | Held: definition was part of non-substantive code revision; courts should harmonize statutes and not infer repeal of common law; result would be absurd if read otherwise |
| Whether Kemp pleaded a claim under MCDCA §14-202(8) (claiming/enforcing a right known not to exist) | Kemp: Nationstar asserted and capitalized fees that §12-121 prohibits and had knowledge (e.g., 2014 regulator advisory) | Nationstar: MCDCA targets collection “methods,” not debt “validity,” and plaintiff failed to plead knowledge | Held: MCDCA §14-202(8) reaches assertions to collect amounts the collector knows it lacks the right to collect; Kemp pleaded illegality of fees and alleged Nationstar’s knowledge -> claim survives dismissal |
| Appropriate role of legislative history and statutory construction here | Kemp: interpret statutes to avoid absurd results and give effect to consumer-protection purpose; legislative history supports reading that protects borrowers post-assignment | Nationstar: rely on plain text definition and earlier practice; legislative history and plain language point against applying §12-121 to assignees | Held: apply canons to harmonize text and common law; code revision not intended to change substance; avoid interpretations producing anomalous results |
Key Cases Cited
- Brenner v. Plitt, 182 Md. 348 (Md. 1943) (usury law: courts look to substance over form to prevent evasion by fees and charges)
- B. F. Saul Co. v. West End Park North, Inc., 250 Md. 707 (Md. 1968) (usury statute must be read as a whole and construed to avoid oppressive or absurd consequences)
- Taylor v. Friedman, 344 Md. 572 (Md. 1997) (CL §12-121’s prohibition on inspection fees applies beyond loan origination to the life of the loan)
- University Sys. of Maryland v. Mooney, 407 Md. 390 (Md. 2009) (assignee’s rights are coextensive with assignor’s; assignee takes subject to same equities)
- Thompkins v. Mountaineer Investments, LLC, 439 Md. 118 (Md. 2014) (discussion of assignee liability under related consumer-finance statutes; reluctance to allow assignment to defeat statutory protections)
- Chavis v. Blibaum & Associates, P.A., 476 Md. 534 (Md. 2021) (MCDCA §14-202(8) interpreted broadly to reach claims/attempts to enforce rights known not to exist)