Kemp v. Nationstar Mortgage

Donna Kemp v. Seterus Inc., et al., No. 2652, September Term 2018. Opinion by Nazarian, J. BANKING – MORTGAGE LENDING – ASSESSMENT OF FEES Section 12-121 of the Commercial Law Article, which prohibits a “lender” from imposing a property inspection fee “in connection with a loan secured by residential property,” applies to assignees of the loan and servicers as well as the original maker of the loan and prohibits them from charging property inspection fees to borrowers. Circuit Court for Montgomery County Case No. 441428V REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 2652 September Term, 2018 ______________________________________ DONNA KEMP v. NATIONSTAR MORTGAGE ASSOCIATION D/B/A MR. COOPER, AS SUCCESSOR BY MERGER TO SETERUS, INC., ET AL. ______________________________________ Fader, C.J., Nazarian, Kenney, James A. III (Senior Judge, Specially Assigned), JJ. ______________________________________ Opinion by Nazarian, J. ______________________________________ Filed: October 1, 2020 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2020-10-22 08:37-04:00 Suzanne C. Johnson, Clerk 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; 1 Fannie Mae and Nationstar Mortgage LLC d/b/a Mr. Cooper (“Nationstar”) are the current named appellees in this case. Seterus merged with, and into, Nationstar effective February 28, 2019. Ms. Kemp’s allegations relate to actions taken by Seterus before the merger.

In June 2019, Nationstar was substituted by Seterus as a party, and the briefs were filed thereafter. Accordingly, we use “Seterus” when referring to the actions underlying Ms. Kemp’s allegations and “Nationstar” when we discuss the arguments made by the parties in their briefs. 2 Unless otherwise indicated, all citations are to the current volume of the Commercial Law Article, Md. Code (1975, 2013 Repl. Vol., 2019 Supp.). (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. 2 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 3 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 4 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 3 Ms. Kemp states the Questions Presented as follows: 1. Did the circuit court err in dismissing the action in contradiction to the precedent of Taylor and the persuasive authority of the CPD and OCFR? 2. Did the circuit court err in concluding that a mortgage assignee acquires greater rights in mortgage contracts than their assignor had to give them? 3. Did the circuit court err in making an unsupported finding of fact at the motion to dismiss stage?

Seterus states the Questions Presented as follows: 1. Whether the Circuit Court properly found that MCL 12-121 did not apply to Seterus and Fannie Mae, when that statute only applies to “lenders,” as defined by MCL 12-101(f), and neither Seterus nor Fannie Mae were “lenders” under the statutory definition? 2. Whether the Circuit Court properly dismissed the Second Amended Complaint with prejudice because Kemp failed to state a valid claim for relief against Seterus or Fannie Mae? 3. Whether Nationstar, as successor by merger to Seterus, is judicially estopped from arguing that the Circuit Court properly found that Seterus was not subject to MCL 12-121, because Nationstar did not dispute its status as a “lender” who was subject to MCL 12-121 when it reached a settlement with the CPD in May 2018, when Seterus did not merge with Nationstar until February 2019, over four months after the 5 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 Circuit Court found that Seterus was not subject to MCL 12- 121, and over ten months after Nationstar’s settlement with the CPD, and none of the requisite elements of judicial estoppel are present? 6 Md. 638 , 644 (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 the light most favorable” to the non-moving party, in this case Ms. Kemp.

Samuels v. Tschechtelin, 135 Md. App. 483, 515 (2000); see RRC Ne., 413 Md. at 643. And we “determine whether the complaint, on its face, discloses a legally sufficient cause of action.” Schisler v. State, 177 Md. App. 731, 743 (2007) (citations omitted). The outcome of this appeal depends in large part on the interpretation of a statute, a question of law that we review de novo. Johnson v. State, 467 Md. 362, 371 (2020). “The cardinal rule of statutory interpretation is to ascertain and effectuate the real and actual intent of the Legislature.” State v. Bey, 452 Md. 255, 265 (2017) (quoting State v. Johnson, 415 Md. 413 , 421–22 (2010)).

We “provide[] judicial deference to the policy decisions enacted into law by the General Assembly,” and “[w]e assume that the legislature’s intent is expressed in the statutory language and thus our statutory interpretation focuses primarily on the language of the statute to determine the purpose and intent of the General Assembly.” Blackstone v. Sharma, 461 Md. 87, 113 (2018) (quoting Phillips v. State, 451 Md. 180, 196 (2017)). To that end, “we begin ‘with the plain language of the statute, and ordinary, popular understanding of the English language dictates interpretation of its terminology.’” Id. (quoting Schreyer v. Chaplain, 416 Md. 94, 101 (2010)). And “[a]bsent ambiguity in the text of the statute, ‘it is our duty to interpret the law as written and apply its plain meaning to the facts before us.’” Johnson, 467 Md. at 373 (quoting In re S.K., 466 Md. 31 , 54 (2019)).

But we “do not read statutory language in a vacuum, nor do we confine strictly our 7 interpretation of a statute’s plain language to the isolated section alone.” Johnson, 467 Md. at 372 (quoting Wash. Gas Light Co. v. Md. Pub. Serv. Comm’n, 460 Md. 667, 685 (2018)).

We view the plain language “within the context of the statutory scheme to which it belongs, considering the purpose, aim or policy of the Legislature in enacting the statute.” Johnson, 467 Md. at 113 (quoting State v. Johnson, 415 Md. at 421 ). In other words, we read the statute as a coherent whole: We presume that the Legislature intends its enactments to operate together as a consistent and harmonious body of law, and, thus, we seek to reconcile and harmonize the parts of a statute, to the extent possible consistent with the statute’s object and scope. Johnson v. State, 467 Md. at 372 (quoting State v. Johnson, 415 Md. at 421–22). In addition, “[o]ur search for legislative intent contemplates ‘the consequences resulting from one construction rather than another.’” Johnson, 467 Md. at 372 (quoting Blaine v. Blaine, 336 Md. 49, 69 (1994)).

We avoid interpretations that lead to illogical or absurd results, even where the legislation at issue is not necessarily identified as ambiguous. See Goshen Run Homeowners Assoc., Inc. v. Cisneros, 467 Md. 74, 109 (2020) (“When interpreting the language in a statute, our interpretation ‘must be reasonable, not absurd, illogical, or incompatible with common sense.’”) (cleaned up). And we fulfill these principles by considering and analyzing three factors: [I]ssue[s] of statutory construction [are] resolvable on the basis of judicial consideration of three general factors: 1) text; 2) purpose; and 3) consequences. Text is the plain language of the relevant provision, typically given its ordinary meaning, Breslin v. Powell, 421 Md. 266, 286 (2011), viewed in context, Kaczorowski v. City of Baltimore, 309 Md. 505, 514 (1987), considered in light of the whole statute, In re Stephen K., 289 8 Md. 294, 298 (1981), and generally evaluated for ambiguity.

Kaczorowski, 309 Md. at 513 . Legislative purpose, either apparent from the text or gathered from external sources, often informs, if not controls, our reading of the statute. Kaczorowski, 309 Md. at 515 . An examination of interpretive consequences, either as a comparison of the results of each proffered construction, Christian v. State, 62 Md. App. 296, 303 (1985), or as a principle of avoidance of an absurd or unreasonable reading, Kaczorowski, 309 Md. at 513, 516 , grounds the court’s interpretation in reality.

Town of Oxford v. Koste, 204 Md. App. 578 , 585–86 (2012). A. The Usury Statute Prohibits The Imposition Of Property Inspection Fees And Applies To Assignees. 1. The Usury Statute Title 12 of the Commercial Law Article contains numerous consumer protection laws relating to loans and credit. Title 12 covers a lot of ground not relevant to this case, and we won’t attempt to treat it comprehensively.

By way of example, though, Subtitle 4 (CL §§ 12-401 et seq.), the Secondary Mortgage Loan Law (“SMLL”), defines the interest and fees that may be charged in association with a second mortgage. Thompkins v. Mountaineer Invs, LLC, 439 Md. 118 , 123–24 (2014) (“The SMLL is a consumer protection measure that was designed to incorporate, complement, and prevent circumvention of the usury laws by limiting the interest, fees, and other charges that a lender could collect from a borrower as part of a second mortgage loan on a residential property.”). Subtitle 3 (CL §§ 12-301 et seq.), the Maryland Consumer Loan Law (“MCLL”), governs small consumer loans and is “part of a statutory scheme that, like the SMLL, governs licensing, the amount of a loan, misleading advertising, discrimination, maximum interest rates, permissible fees, attorney’s fees, and lender’s disclosure 9 duties . . . .” Price v. Murdy, 462 Md. 145, 156 (2018). Other Subtitles cover small loans (Subtitle 2), retail credit accounts (Subtitle 5), credit grantor revolving credit provisions (Subtitle 9), and credit grantor closed end credit provisions (Subtitle 10).

The part relevant to this case is Subtitle 1, which we’ll call the “Usury Statute.” Its core provision limits, with some exceptions, the maximum allowable interest rate to six percent per year: Except as otherwise provided by law, a person may not charge interest in excess of an effective rate of simple interest of 6 percent per annum on the unpaid principal balance of a loan. CL § 12-102. That provision was codified as part of the Commercial Law Article in 1975, without any substantive change from the first clause of former Art. 49 § 3 (1975 Md. Laws 380–81), and it has not been amended since. Exceptions to CL § 12-102’s six percent maximum rate are set forth in CL § 12-103 and have been amended numerous times over the years.

For example, subsection (b) applies to residential mortgages, which at the time that section was codified in 1975, could not exceed 10%. 1975 Md. Laws 382 . The current version of CL § 12-103(b) has no maximum allowable rate for residential mortgages so long as certain conditions are met. Subtitle 1 contains other restrictions beyond limits on interest rates: • CL § 12-108 provides that a “lender”4 may not charge a borrower a point or 4 At all times relevant to this case, and as we’ll explain in greater detail below, “lender” was defined in the general definitions for Subtitle 1 simply as “a person who makes a loan subject to this subtitle.” Md. Code (1975, 2013 Repl. Vol.), CL § 12-101(f).

As of January 1, 2019, a “[l]ender” is “a licensee or a person who makes a loan under this subtitle.” CL § 12-101(f); 2018 Md. Laws 346 , 4065–66. A “licensee” is “a person that is required to be licensed to make loans subject to [Subtitle 1], regardless of whether the person is actually licensed. CL § 12-101(g). 10 a fraction of a point, with some exceptions. • CL § 12-109 requires a “lending institution”5 that “creates or is the assignee of” an escrow account for certain first mortgages to pay interest to the borrower on the funds in the escrow account. • CL § 12-109.2 prohibits a “lender and an assignee of a lender” from collecting “a collection fee or service charge on the maintenance of an escrow account on a first mortgage.” CL § 12-109.2(a)(3). • CL § 12-113 prohibits a “lender” from refusing to lend money to any person solely because of “[g]eographic area or neighborhood” or “[r]ace, creed, color, age, sex, marital status, handicap, or national origin.” • CL § 12-124(2) and (3) prohibit a “lender” from requiring a borrower, “as a condition to receiving or maintaining a loan” secured by a first mortgage, to purchase property and flood insurance coverage against risks to improvements in an amount that would exceed the replacement cost of the improvements. • CL § 12-125 requires a “lender6 who offers to make or procure a loan secured by” certain first mortgages to provide the borrower with a financing agreement. • CL § 12-126 allows a borrower to prepay all or part of a mortgage on the borrower’s primary residence, unless otherwise provided in the loan contract. CL § 12-126(a), (b).

It further requires the “lender” to refund the borrower the unearned portion of the precomputed interest charge. CL § 12-126(c). Subtitle 1 also includes the limitation at issue in this case, CL § 12-121, which prohibits (with exceptions not applicable here) a “lender” from imposing an inspection fee “in connection with” a residential mortgage: (a) In this section, the term “lender’s inspection fee” means a fee imposed by a lender to pay for a visual inspection of real property. 5 “Lending institution” is defined in CL § 12-109(a)(3) as “a bank, savings bank, or savings and loan association doing business in Maryland.” 6 For the purposes of CL § 12-125 only, “lender” is defined as “a person subject to the licensing requirements of Title 11, Subtitle 5 of the Financial Institutions Article” and “does not include a person exempt from licensure under § 11-502 of the Financial Institutions Article.” CL § 12-125(a)(5)(i), (ii). 11 (b) Except as provided in subsection (c) of this section, a lender may not impose a lender’s inspection fee in connection with a loan secured by residential real property. (c) A lender’s inspection fee may be charged if the inspection is needed to ascertain completion of: (1) Construction of a new home; or (2) Repairs, alterations, or other work required by the lender.

(d) This section does not apply to an appraisal of the value of real property by a lender or to fees imposed in connection with an appraisal. Finally, Subtitle 1 provides for both civil and criminal enforcement. Although there is no express authorization for civil claims, CL § 12-111(b) does establish a statute of limitations for a private action for “usury” at six months after the loan is satisfied: A private action for usury under this subtitle may not be brought more than 6 months after the loan is satisfied. “Usury” is defined broadly as charging an amount in “interest” greater than what Subtitle 1 permits: “Usury” means the charging of interest by a lender in an amount which is greater than that allowed by this subtitle. CL § 12-101(m).

And “interest” likewise is broadly defined as including not only the interest charged on a loan, but also other fees and charges: “Interest” means, except as specifically provided in § 12-105 of this subtitle, any compensation directly or indirectly imposed by a lender for the extension of credit for the use or forebearance of money, including any loan fee, origination fee, service and carrying charge, investigator’s fee, time-price differential, and any amount payable as a discount or point or otherwise payable for services. CL § 12-101(e). 12 Subsection (b) of CL § 12-112 impliedly allows a private claim against assignees, endorsees, or transferees who receive the debt with notice of usury, insofar as it prohibits a civil claim or plea of usury against assignees, endorsees, or transferees of a debt if they received the debt instrument without notice of usury in the instrument’s creation or assignment: A claim or plea of usury is not available against a legal or equitable assignee, endorsee, or transferee of any bond, draft, mortgage, deed of trust, security agreement, promissory note, or other instrument or evidence of indebtedness, if he receives it for a bona fide and legal consideration without notice of any usury in its creation or subsequent assignment. The prohibition of such a claim implies the availability of a civil remedy for usury against an assignee, endorsee, or transferee who receives the debt instrument with notice. Thompkins, 439 Md. at 132 n.12.

Also, CL § 12-114 references both civil and criminal enforcement. Subsection (b)(1), the source of Ms. Kemp’s statutory damages claim,7 provides a monetary remedy to borrowers when the usury statute has been violated: (b)(1) Any person who violates the usury provisions of this subtitle shall forfeit to the borrower the greater of: (i) Three times the amount of interest and charges collected 7 In addition to challenging the applicability of CL § 12-121, Fannie Mae and Nationstar argue that these claims should fail because “no private right of action exists for a violation of that statute.” They argue that a private right of action is only permitted based on violations of Subtitle 1’s “usury provisions” and that CL § 12-121 is not a usury provision. We disagree. As we explained above, Subtitle 1 defines “usury” as the charging of “interest,” which, in turn, is broadly defined as including “any loan fee” that includes, by its plain terms, CL § 12-121’s property inspection fees.

CL § 12-101(e). Accordingly, contrary to Nationstar and Fannie Mae’s position, CL § 12-114’s monetary remedy for violations of the “usury provisions” apply to violations of CL § 12-121. 13 in excess of the interest and charges authorized by this subtitle; or (ii) The sum of $500. Finally, CL § 12-114(c) classifies the violation of CL § 12-106’s disclosure provisions as a misdemeanor, and CL § 12-122 makes a knowing and willful violation of certain provisions—including the one at issue here (CL § 12-121)—a misdemeanor. 2. Analysis The circuit court dismissed Ms. Kemp’s claims in large part based on its conclusion that neither Fannie Mae (the assignee) nor Seterus (the mortgage servicer and Fannie Mae’s alleged agent) could be liable under CL § 12-121 because neither qualified as a “lender.” As noted above, and at all times relevant to this case, CL § 12-101(f) defined “lender” in the general definitions section of Subtitle 1 as “a person who makes a loan subject to this subtitle.” Fannie Mae and Seterus argued before the circuit court, and they argue here, that CL § 12-121 prohibits a “lender” from imposing a “lender’s inspection fee and that they are not “lenders” because they do not “make” loans.

Therefore, their reasoning goes: although CL § 12-121 would prohibit the original lender from charging inspection fees, CL § 12-121 does not prohibit them from charging inspection fees. The circuit court agreed with their reasoning: Ordinarily, in drafting statutes, when the General Assembly uses the word “means” “the definition is intended to be exhaustive.” Hackley v. State, 389 Md. 387, 393 (2005). By contrast, when the General Assembly uses the term “includes” in a statute, the term generally is intended to be illustrative and not a limitation. Tribbitt v. State, 403 Md. 638 , 647–48 (2008).

In this case, the meaning of the statute is plain; only “persons” [] which make loans to “borrowers” [] are lenders and thus covered by the statute. 14 Nowhere in the second amended complaint does Kemp allege that either Seterus or Fannie [Mae] “makes loans,” or that Kemp borrowed money from either defendant. According to Kemp, “as the assignee of the maker of the loans” to Kemp and the other putative class members, “Fannie Mae is now the lender and the maker of the loans, and Seterus is authorized to act as its agent.” [] The problem with the plaintiff’s theory of the case, however, is that the facts alleged, even if true, do not fit the applicable statute under which she has sued. Kemp does not allege that either Seterus or Fannie Mae made any of the loans in question[], or even makes any loans in general, within the meaning of Section 12-101. Fannie Mae bought Kemp’s loan in the secondary market from the financial institution which made her the loan, Countrywide Mortgage.

Just as alchemy cannot transform lead into gold, Fannie Mae’s purchase of Kemp’s loan from Countrywide does not make Fannie Mae a lender under the statute. Although we may be the first to do so,8 we disagree with that reading of the statute. We begin with its plain language, Blackstone, 461 Md. at 113 , and we read that language “within the context of the statutory scheme to which it belongs, considering the purpose, aim or policy of the Legislature in enacting the statute.” Johnson, 467 Md. at 113 (quoting State v. Johnson, 415 Md. at 421 ). And we avoid an interpretation that has illogical or absurd results, even where the legislation at issue is not necessarily identified as ambiguous.

See Goshen Run, 467 Md. at 109 . In this instance, we conclude that the General 8 As Seterus points out, several recent federal district court decisions have reached the same conclusion as the circuit court based on similar reasoning. Suazo v. U.S. Bank Trust, NA, 2019 WL 4673450 at ¹⁰ (D. Md. Sept. 25, 2019); Robinson v. Fae Servicing, LLC, 2019 WL 4735431 at ⁸–⁹ (D. Md. Sept. 27, 2019); Roos v. Seterus, Inc., 2019 WL 4750418 at ⁵ (D. Md. Sept. 30, 2019). Since the parties filed their briefs, another federal district court decision has followed suit.

Flournoy v. Rushmore Loan Servs., LLC, 2020 WL 1285504 at ⁵–⁷ (D. Md. Mar. 17, 2020). That said, this is the first Maryland appellate decision addressing this question of Maryland statutory interpretation. 15 Assembly did not intend for CL § 12-121’s broad prohibition against property inspection fees to apply only to the originator of the loan and, even more to the point, to allow assignees of the loan or their agents to charge the very fees the originators cannot. We get to this conclusion first by examining the plain language of the statute. “Lender” is defined, at all relevant times, as “a person who makes a loan subject to this subtitle.” At first glance, it appears that the legislative intent was to limit “lenders” to those entities who originate loans. But the legislative history and Court of Appeals’s case law indicate otherwise.

We look second at the history of the statute’s definition of the term “lender.” As we observe above, the Commercial Law Article was codified in 1975.9 The interest and usury laws had previously been codified at 1957 Md. Code, Art. 49 (1972 Repl. Vol., 1974 Supp.). Article 49 did not define “lender” or “borrower.” Md. Code (1957, 1972 Repl. Vol., 1974 Supp.), Art. 49.

The definitions of those terms were added as part of the Usury Statute’s recodification. “Lender” was defined as “a person who makes a loan subject to this Subtitle.” 1975 Md. Laws 378 . And “borrower” was defined simply as “a person who borrows money under this Subtitle.” 1975 Md. Laws 376 . The Revisor’s Notes for both terms state that the definition of “lender” was “new” language added to indicate that the terms relate only to a person that lends (or borrows) money under Subtitle 1, as opposed to under another subtitle or law: 9 Section 12-121 was enacted in 1986, eleven years after the Commercial Law Article was codified and the definitions of “lender” and “borrower” were enacted. 1986 Md. Laws 2207–08. 16 Revisor’s Note: This subsection is new language added to indicate that, in this subtitle, the term [“lender”] [“borrower”] relates only to a person who lends money under the provisions of this subtitle and not, for example, under any other credit law. 1975 Md. Laws 376 , 378. This reveals that the purpose of adding the definition of “lender” (and “borrower”) was not to differentiate between persons who “make” loans and those who do not, or persons who “borrow” money and those who do not.

Instead, it was to differentiate between loans made under Subtitle 1 and those that were not. The focus was on the types of loans, not the actors making them. Indeed, when the statute does address the actors involved in credit transactions, it supports the conclusion that the legislature intended the statute to have a broad reach. For example, the term “person” is also defined and includes a broad range of actors: “Person” includes an individual, corporation, business trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity. 1975 Md. Laws 378 .

Third, the Maryland case law supports our conclusion that CL § 12-121 is not limited to the originators of loans. In Taylor v. Friedman, the only Maryland case to interpret CL § 12-121, the Court of Appeals examined the legislative history of CL § 12- 121 and held that the prohibition against lenders charging inspection fees was not limited to fees assessed as part of closing costs. 344 Md. 572 , 583–84 (1997). Although the Court did not address squarely whether CL § 12-121 applied to assignees of the loan, the parties involved were the assignees, not the originators, of the loan at issue. The question of whether those parties fell within the definition of “lender” was not raised, and the Court 17 did not consider it.

Instead, the Court assumed, without discussion, that CL § 12-121 did apply to the assignee and holder of the note, which was indisputably not the originator of the loan. The Court also assumed, without discussion, that Larry G. Taylor, who was not the original borrower but was instead a grantee, could bring a claim under CL § 12-121. The precise question presented, as stated by the Court, was whether CL § 12-121 “prohibits a mortgagee from charging the mortgagor fees for post-default, visual inspections of the mortgaged residence’s exterior that are made to ascertain the condition of the security.” Id. at 574. The “mortgagor” referenced was Mr. Taylor, who, in acquiring the property at issue, assumed the grantor’s obligations under the deed of trust.

Id. at 574. The “mortgagees” referenced were assignees of the note. The Court referred to the various assignees as “Lender” throughout its analysis.10 Mr. Taylor had, from time to time, been delinquent in making monthly payments on the note, and when a delinquency had continued for more than forty-five days from the due date, the Lender had assessed a $10.00 inspection fee to his account for inspections conducted by a third party. Id. at 575.

The Lender eventually instituted a foreclosure action, 10 The Court described the mortgagees as follows: The respondents are substitute trustees under the deed of trust who were designated by Margaretten & Company, Inc., the holder of the note secured by the deed of trust when the foreclosure was instituted. Margaretten & Company, Inc. subsequently was acquired by Bank of America, F.S.B. and renamed BA Mortgage, a division of Bank of America, F.S.B. We shall refer to the entity that held the note at any given time as “Lender.” Taylor, 344 Md. at 574–75. 18 and Mr. Taylor intervened and filed a counterclaim asserting that the Lender had breached the loan contract by unlawfully assessing inspection fees in violation of CL § 12-121. Mr. Taylor paid off the balance of the loan, and the case proceeded to trial on the counterclaim. The circuit court limited CL § 12-121’s prohibition to inspection fees charged as part of closing costs.

Id. at 577. Mr. Taylor appealed, and this Court affirmed. Id. at 578. The Court of Appeals reversed, holding that the plain language of the statute— which prohibits property inspection fees “in connection with a loan secured by residential real property”—prohibited the Lender (again, an assignee) from assessing inspection fees to Mr. Taylor in connection with his default.

Id. at 574, 581. The Court relied on the rule of statutory construction that where a statute expresses a general rule followed by one or more specific exceptions, “a court ordinarily cannot add to the list of exceptions.” Id. at 581 (citing Gable v. Colonial Ins. Co., 313 Md. 701, 704 (1988); Schmidt v. Beneficial Fin. Co., 285 Md. 148, 155 (1979)).

Although the Court did not discuss its statutory construction in great depth, its reasoning viewed CL § 12-121 as expressing a general rule that property inspection fees may not be assessed. Two exceptions are listed: those related to construction of a new home and those related to repairs, alterations, or other work required by the lender. But because there is no exception that would allow property inspection fees assessed in association with a mortgagor’s default, the Court found no authority to add such an exception to the list. The Court reinforced its interpretation of the statute by examining the legislative history of CL § 12-121.

Relying on the principle that “[e]ven where the language of a statute is plain and unambiguous, [the Court] may look elsewhere to divine legislative 19 intent; the plain meaning rule is not rigid and does not require [the Court] to read legislative provisions in rote fashion and in isolation.” Taylor, 344 Md. at 582 (quoting Blaine, 336 Md. at 64 ). The Court concluded that it was not the intent of the General Assembly to limit the applicability of CL § 12-121 solely to inspection fees charged at closing. Id. In reaching its conclusion, the Court acknowledged that the background for the enactment of CL § 12-121 in 1986 was indeed a “concern over real property closing costs.” Id. at 582.

It explained how its enactment had been initiated by the January 1986 Report of the Task Force on Real Property Closing Costs requested by Governor Harry R. Hughes. Id. at 579. The Court observed that there was “no question” that the Task Force had been created out of concerns about real property closing costs. Id. at 582.

But the Report’s recommendations went beyond closing costs, and the Court highlighted, as an example, the enactment of CL § 12-109.2 as “a prohibition against a Lender’s imposing ‘a collection fee or service charge on the maintenance of an escrow account on a first mortgage or first deed of trust.’” Id. It described that prohibition as “continuing” and lasting “throughout the life of the loan,” and it reinforced the conclusion that CL § 12-121’s prohibition is not limited to fees associated with closing costs.11 Id. 11 What the Court did not observe was that unlike CL § 12-121, § 12-109.2 expressly provided that an “assignee of the lender” was prohibited from imposing service fees on escrow accounts: 12-109.2(b) A lender, or the assignee of the lender, may not impose a collection fee or service charge on the maintenance of an escrow account on a first mortgage or a first deed of trust. 1986 Md. Laws 2206 . The current version of CL § 12-109.2, as amended, continues to include “assignees” of lenders within its ambit: 12-109(a)(1) “Lender” includes a