Nationstar Mortgage v. Kemp

Nationstar Mortgage LLC d/b/a Mr. Cooper, as Successor by Merger to Nationstar, Inc., et. al. v. Donna Kemp No. 43, September Term 2020 Mortgages – Assignment. As a general rule, if the person that originates a mortgage loan assigns the mortgage loan to another person, the assignee of the loan has the same rights and obligations under a deed of trust that secures that loan as the originator of the loan. Statutes – Statutory Interpretation – Code Revision – Maryland Usury Law. Code revision bills that re-codify existing statutes into new articles of the Maryland Code are not intended to change the substance of existing law.

The addition of a definition of “lender” to the Maryland Usury Law when that law was re-codified as part of the Commercial Law Article was not intended either to change the substance of the Maryland Usury Law or to abrogate the common law of assignment, particularly when the code revisors explicitly disclaimed any intention to change the law in the report to the General Assembly that accompanied the code revision bill. Maryland Usury Law – Prohibited Fees. The Maryland Usury Law restricts the assessment of an inspection fee against a borrower in connection with the financing of residential real property. Maryland Code, Commercial Law Article, §12-121.

That prohibition applies during the life of a mortgage loan and applies to an assignee and a servicer of the mortgage loan, as well as to the originator of the loan. Consumer Finance – Debt Collection – Prohibited Practices. The Maryland Consumer Debt Collection Act, Commercial Law Article, §14-201 et seq., prohibits a debt collector from engaging in certain conduct when “collecting or attempting to collect an alleged debt” based on a consumer transaction. Among other things, a debt collector may not “claim … to enforce a right with knowledge that the right does not exist.” That prohibition is not limited simply to “methods” of debt collection.

Consumer Finance – Debt Collection – Prohibited Practices – Statement of Cause of Action. The plaintiff’s complaint alleged that the servicer of the plaintiff’s mortgage asserted a right to collect property inspection fees from the borrower – fees that are prohibited by §12-121 of the Maryland Usury Law – and that the servicer had knowledge of that prohibition. It adequately stated a claim based on a violation of the Maryland Consumer Debt Collection Act. Circuit Court for Montgomery County Case No. 441428V Argument: March 5, 2021 IN THE COURT OF APPEALS OF MARYLAND No. 43 September Term, 2020 NATIONSTAR MORTGAGE LLC D/B/A MR.

COOPER, ET AL. V. DONNA KEMP _____________________________________ Barbera, C.J., McDonald Watts Hotten Getty Booth Biran, JJ. ______________________________________ Opinion by McDonald, J. Getty, J., dissents. ______________________________________ Filed: August 27, 2021 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2022-06-15 14:33-04:00 Suzanne C. Johnson, Clerk A clever man once said that “cauliflower is nothing more than cabbage with a college education.”1 It might be said, less cleverly, that code revision in Maryland – the process that restates statutes to make them more logical, accessible, and compatible with the English language – results in a new law that is nothing more than the old law with a college education. At bottom, this case is about whether a code revision bill did more than that. Some years ago, Respondent/Cross-Petitioner Donna Kemp entered into a mortgage loan secured by a deed of trust on her home.

The originator of that loan later assigned it to Petitioner/Cross-Respondent Federal National Mortgage Association (“Fannie Mae”), which contracted with the predecessor of Petitioner/Cross-Respondent Nationstar Mortgage, LLC (“Nationstar”), to service the loan – that is, to do such things as collecting and disbursing payments owed by the borrower. Under longstanding Maryland law concerning the assignment of mortgages, Fannie Mae succeeded to the same rights and obligations of the original lender. Ms. Kemp later fell behind on her mortgage payments. After declaring her to be in default, Nationstar assessed Ms. Kemp fees for drive-by inspections of the property.

A provision of the Maryland Usury Law prohibits lenders from imposing such fees. Ms. Kemp, Fannie Mae, and Nationstar entered into a loan modification agreement to resolve the default, but Ms. Kemp objected to the assessment of the property inspection fees. 1 See Directory of Mark Twain’s maxims, quotations, and various opinions at https://perma.cc/5G7U-56ZX. Nationstar took the position that neither Fannie Mae, the assignee of the loan, nor its agent Nationstar, fit within a definition of “lender” that had been added to the Usury Law as part of code revision. Nationstar asserted that it was therefore exempt from the prohibition against property inspection fees.

Ms. Kemp disagreed. Ms. Kemp filed a complaint in the Circuit Court for Montgomery County and, after it was dismissed by the Circuit Court for failure to state a cause of action, pursued this appeal. The primary question in this appeal is whether the addition of a definition of “lender” to the Maryland Usury Law during code revision effected a significant change in that law – and the Maryland common law – that lay latent for more than four decades before this case arose. We hold that code revision did not change Maryland law applicable to assignees of mortgage loans and that the prohibition on property inspection fees applies to Nationstar as the agent of Fannie Mae.

We also hold, consistent with the principles announced in the Court’s opinion in Chavis v. Blibaum & Associates, P.A.,2 also issued today, that Ms. Kemp’s complaint adequately stated a claim under the Maryland Consumer Debt Collection Act. 2 476 Md. 534 (2021). 2 I Legal Background A. Financing Residential Real Property 1. Mortgages A mortgage is a device for securing a debt with real property. In a typical residential real estate transaction, in which a home buyer finances the purchase of a home through a mortgage, the buyer is the mortgagor and the lender is the mortgagee. In Maryland, financing of residential real estate is typically accomplished when the home buyer executes a note promising to repay the loan to the lender and a deed of trust transferring an interest in the property to a trustee to secure that promise.

Although a deed of trust may be technically distinct from a common law mortgage, it is common both colloquially and in legal parlance to use the term “mortgage” as a shorthand for financing that involves a deed of trust. See Legacy Funding LLC v. Cohn, 396 Md. 511 , 513-14 n.1 (2007). For convenience, we will use that term on occasion in our opinion in this case, which arose from the financing of a home secured by a deed of trust. A lender may designate a servicer to act as its agent in administering the mortgage.

Typically, a servicer collects payments from the mortgagor on the debt and may take other actions such as the release of a lien and the payment of property insurance and property taxes. See Black’s Law Dictionary (9th ed. 2009) at 1105 (“mortgage servicing”); see also Maryland Code, Financial Institutions Article, §11-501(n); Commercial Law Article, §13- 316. 3 2. Assignment of Mortgages Like other loans, a mortgage may be assigned by the original lender to another person or entity. A security instrument, like a mortgage or deed of trust, follows the debt instrument if the debt instrument is sold or negotiated to a different entity – that is, if the mortgage loan is assigned.

See Michael J. McKeefery & Richard E. Solomon, Gordon on Maryland Foreclosures (5th ed. 2021), ch. 4 & nn.1-2. Any assignment or sale of a debt instrument after the initial transaction is said to take place in a secondary market.3 Mortgages are one of the oldest forms of secured debt to be assigned and sold in a secondary market. Such a market has existed in England since at least the thirteenth century. Jo Anne Bradner, The Secondary Mortgage Market and State Regulation of Real Estate Financing, 36 Emory L.J. 971 , 974 (1987).4 Assignments of mortgages were well 3 A “secondary market” is, in general, “any market in which participants deal in items which have seen their first sale elsewhere.” Jo Anne Bradner, The Secondary Mortgage Market and State Regulation of Real Estate Financing, 36 Emory L.J. 971 , 973 (1987). 4 It is important not to confuse the assignment of a mortgage, which is a secondary market transaction, with two other, more recent, types of transactions related to finance and residential real estate.

First, many homeowners obtain home equity loans or other forms of “second mortgages” on real property that is already subject to a first mortgage or similar prior encumbrance, often established in connection with the purchase of the property. Second mortgages are regulated under the Maryland Secondary Mortgage Loan Law, Maryland Code, Commercial Law Article, §12-401 et seq. Despite the title of that law, it concerns “second mortgages,” not what has now come to be referred to as the “secondary mortgage market.” See Thompkins v. Mountaineer Investments, LLC, 439 Md. 118 , 125 n.4 (2014). Second, in recent years, many mortgages that have been assigned have been bundled in pools and securitized by financial intermediaries as an investment product.

The lack of adequate regulation of that phenomenon in recent decades triggered the Great Recession. 4 known under the common law in this country. Indeed, a century ago it was observed that “there is scarcely any business transaction that has been more common and familiar … than the assignment of mortgages.” William E. Britton, Assignment of Mortgages Securing Negotiable Notes, 10 Ill. L. Rev. 337 (1915) (internal quotation marks and citation omitted). In Maryland, it has long been understood that a mortgage may be assigned.

Since at least 1856, the Maryland Code has provided specific direction on how to draft an instrument that assigns a mortgage. Chapter 154, ch. 4th, §§116, 117, Laws of Maryland 1856. That law is currently codified in Maryland Code, Real Property Article (“RP”), §4- 203. Under the common law, an assignee generally has the same rights and responsibilities as its assignor – no more, no less.

For example, this Court recently stated: [T]he rights of an assignee are concomitant to those of an assignor … “An unqualified assignment generally operates to transfer to the assignee all of the right, title and interest of the assignor in the subject of the assignment and does not confer upon the assignee any greater right than the right possessed by the assignor.”… [A]ssignees are “bound to the same limitations period as their assignor.” University System of Maryland v. Mooney, 407 Md. 390, 411 (2009) (citing and quoting James v. Goldberg, 256 Md. 520, 527 (1970) and Jones v. Hyatt Ins. Agency, Inc., 356 Md. 639 , 653 n.8 (1999)). See, e.g., Gretchen Morgenson & Joshua Rosner, Reckless Endangerment (2011). The recent trend of securitization at the behest of financial intermediaries is distinct from the assignment of a mortgage which, as indicated in the text, has been common for centuries. 5 The rights and responsibilities of an assignee of a mortgage are no different, as this Court has indicated.

See Kemp’s Ex’x v. M’Pherson, 7 H. & J. 320, 336 (1826) (“as a general rule no position is better established than that the assignee stands in the shoes of the assignor, and takes the claim, subject to all the equity it possessed in [the assignor’s] hands”) (emphasis in original); Cumberland Coal & Iron Co. v. Parish, 42 Md. 598, 614 (1875) (“the assignee takes the mortgage, and the debt secured by it, upon the same terms, and subject to the like equities and defences that it was subject to in the hands of the assignor”); Farmers’ & Merchants’ National Bank v. Anderson, 152 Md. 641, 645 (1927) (same); Ressmeyer v. Norwood, 117 Md. 320, 331-32 (1912) (same); cf. In re Ward, 2008 WL 508623 (Bankr. D. Md. Feb. 20, 2008) at ¹ n.3 (under Maryland law, assignee of mortgage “stood in the shoes of [the assignor] with no more and no less rights than its assignor”); see also RP §2-103.5 As a general rule, an assignee of a mortgage acquires no power with respect to the mortgage that the assignor did not have. Barrick v. Horner, 78 Md. 253, 256 (1893) (“no theory can be maintained by which [the assignee of the mortgage], by merely succeeding to the rights of the mortgagee, could obtain a power which the latter never had”). 5 There is an exception to the general rule for an assignee who is a bona fide purchaser for value of a promissory note secured by a mortgage who has no notice of a defense or equity of the mortgagor. That exception has no bearing on this case – as we shall see, a statute provides notice to the world.

However, this exception does reinforce that the general rule is that an assignee steps into the shoes of the assignor. See Part III.B.2 of this opinion below. 6 Beginning in the 1930s, in response to the Great Depression and in an effort to support home ownership, Congress created entities that either insure, guarantee, or purchase (i.e., take assignment of) mortgage loans. Bradner, supra, 36 Emory L. J. at 975- 77. Pertinent to this case, among those entities was the predecessor of the Federal National Mortgage Association, now commonly referred to as FNMA or Fannie Mae, which was created to buy and sell home mortgages.

Id. at 975-77 & nn.16-25.6 To facilitate the sale and assignment of mortgages, Fannie Mae has developed forms and guidelines for mortgages. 3. The Maryland Usury Law Maryland law has long regulated what a lender may charge a borrower in connection with a loan. The State Constitution establishes a legal rate of interest7 and the General Assembly has legislated on the subject since colonial times.8 See generally Scott v. Leary, 34 Md. 389 (1871) (recapping development of Maryland Usury Law beginning in 1704). Once codified in a separate article of the Maryland Code – most recently, former Article 49 of the 1957 Code – the Maryland Usury Law now appears as Subtitle 1 of Title 6 Some decades later, Fannie Mae was authorized to issue securities backed by the mortgages that it purchased.

Bradner, supra, 36 Emory L. Rev. at 976 n.26. 7 Maryland Constitution, Article III, §57 (“The Legal Rate of Interest shall be Six per cent. per annum; unless otherwise provided by the General Assembly.”) (punctuation and italics in original). 8 E.g., Chapter 69, §1, Laws of Maryland 1704 at pp. 351-52 (“no person or persons whatsoever . . . shall exact or take directly or Indirectly for Loane of any Moneys, Wares, or Merchandizes or other Comoditys whatsoever to be paid in money above the value of Six pounds for the forebearance of one hundred pounds for one year . . . .”). 7 12 of the Commercial Law Article (“CL”). The Usury Law defines “usury” as “the charging of interest by a lender in an amount which is greater than that allowed by this subtitle.” CL §12-101(m). Other sections of the law regulate the amount of interest that may be charged. See, e.g., CL §§12-101(k), 12-102, 12-103.

However, since money is fungible and people are creative, efforts to circumvent the restrictions of the Usury Law have sometimes taken the form of fees or other charges that were assessed to the borrower. In Brenner v. Plitt, 182 Md. 348 (1943),9 this Court rejected one such effort in colorful language restated from an earlier case: Usury is a moral taint wherever it exists and no subterfuge shall be permitted to conceal it from the eye of the law…. “[I]t matters not in what part of the transaction it may lurk, or what form it may take … or whether it be a pretended sale and lease, or under whatever guise the lender – always fruitful in expedients – may attempt to evade the law, Courts of justice, disregarding the shadow and looking to the substance, will ascertain what in truth was the contract between the parties.” 182 Md. at 356 -57 (quoting Andrews v. Poe, 30 Md. 485, 487-88 (1869)). Consistent with this Court’s statement in Brenner, the Maryland Usury Law covers not only the stated rate of interest, but also, in general, “any compensation” required by a lender “directly or indirectly” related to “the extension of credit for the use or forbearance 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 ….” CL 9 It appears from the Court’s recitation of the facts in Brenner that the case involved a debt secured by a mortgage that had been assigned, although the precise time and terms of that assignment are not apparent from the Court’s opinion. 8 §12-101(e) (definition of “interest”). Thus, various provisions of the Maryland Usury Law address fees or charges that may be imposed in connection with a loan.

Fees charged in connection with mortgages on residential real property have been a major concern of the General Assembly when addressing amendments to the Maryland Usury Law. In B. F. Saul Co. v. West End Park North, Inc., 250 Md. 707 (1968), this Court conducted a detailed analysis of various fees charged in connection with the financing of residential real property and the application of the Usury Law to those fees. The Court stated that “[i]n order to divine the legislative intent behind [a provision of the Usury Law], it is necessary to consider the primary objective sought to be achieved by the Act, which was to provide protection for the home buyer from sharp practices of some lenders.” 250 Md. at 720 . In analyzing a particular section of the Usury Law, the Court favored the “reading of the statute as a whole” rather than focusing solely on the particular section.

Id. at 722 . It emphasized that “[i]n ascertaining the intention of the legislature, all parts of a statute are to be read together to find the intention as to any one part, and all parts are to be reconciled and harmonized if possible.” Id. In agreeing with the lower court’s “practical and sensible” construction of an imprecise provision of the Usury Law, the Court reiterated the “cardinal rule[] of statutory construction … that wherever possible an interpretation should be given to the statutory language which will not lead to oppressive, absurd or unjust consequences.” Id. 4. CL §12-121 The primary issue in this case concerns the application of CL §12-121, a provision of the Maryland Usury Law that restricts the charging of an inspection fee in connection 9 with the financing of residential real property.

That section, which was originally enacted in 1986,10 reads as follows: (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. (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.

The key provision at issue in this case is the proscription in subsection (b) against the imposition of a “lender’s inspection fee” in connection with a mortgage loan. Since at least January 2014, the Maryland Commissioner of Financial Regulation has taken the position that mortgage servicers like Nationstar are subject to the prohibition on inspection fees in CL §12-121 during the life of a mortgage loan. Advisory Notice (January 7, 2014), available at https://perma.cc/2WYR-S22S. B. Debt Collection – Maryland Consumer Debt Collection Act Also at issue in this appeal is the application of another consumer protection statute codified in the Commercial Law Article – the Maryland Consumer Debt Collection Act 10 Chapter 628, Laws of Maryland 1986. 10 (“MCDCA”).

CL §14-201 et seq. The MCDCA regulates the conduct of anyone who collects – or attempts to collect – a debt arising from a consumer transaction. A consumer transaction is defined as a “transaction involving a person seeking or acquiring real or personal property, services, money, or credit for personal, family, or household purposes.” CL §14-201(c). During the period pertinent to this case,11 the statute provided that a “[debt] collector may not:” (1) Use or threaten force or violence; (2) Threaten criminal prosecution, unless the transaction involved the violation of a criminal statute; (3) Disclose or threaten to disclose information which affects the debtor’s reputation for credit worthiness with knowledge that the information is false; (4) Except as permitted by statute, contact a person’s employer with respect to a delinquent indebtedness before obtaining final judgment against the debtor; (5) Except as permitted by statute, disclose or threaten to disclose to a person other than the debtor or his spouse or, if the debtor is a minor, his parent, information which affects the debtor’s reputation, whether or not for credit worthiness, with knowledge that the other person does not have a legitimate business need for the information; (6) Communicate with the debtor or a person related to him with the frequency, at the unusual hours, or in any other manner as reasonably can be expected to abuse or harass the debtor; (7) Use obscene or grossly abusive language in communicating with the debtor or a person related to him; 11 In 2018, the statute was amended to add two additional prohibited practices – engaging in unlicensed debt collection activity and violating the federal Fair Debt Collection Practices Act.

Chapters 731, 732, Laws of Maryland 2018. 11 (8) Claim, attempt, or threaten to enforce a right with knowledge that the right does not exist; (9) Use a communication which simulates legal or judicial process or gives the appearance of being authorized, issued, or approved by a government, governmental agency, or lawyer when it is not. CL §14-202. The provision most pertinent to this case is subsection (8) concerning a debt collector’s assertion of a right “with knowledge that the right does not exist.” A debt collector who violates the MCDCA is liable for damages caused by the violation. CL §14- 203.

A violation of the MCDCA is also defined to be an “unfair and deceptive trade practice” prohibited by the Maryland Consumer Protection Act. CL §§13-301(14)(iii), 13- 303. II Facts and Proceedings This case was decided in the Circuit Court on the basis of a motion to dismiss the complaint. In reviewing that ruling, we accept the well-pleaded allegations of the complaint as true.

The Second Amended Complaint is the operative pleading for that purpose. We summarize the facts that are alleged in the Second Amended Complaint or that otherwise appear to be undisputed. A. Ms. Kemp’s Mortgage 1. Origination and Assignment of Mortgage In April 2007, Ms. Kemp refinanced her home in Glen Burnie and for that purpose executed a deed of trust in favor of the lender, Countrywide Home Loans, Inc. (“Countrywide”), to secure the mortgage loan she received from Countrywide.

The deed 12 of trust was drafted and executed on a Fannie Mae form. The fine print of the 12-page form addressed various terms of the deed of trust. Paragraph 14 of the deed of trust, entitled “Loan Charges,” stated: 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). At some point after execution of the deed of trust, the mortgage loan and the deed of trust that secured it were acquired by Fannie Mae.12 The land records for Anne Arundel County reflected an assignment of the deed of trust to Fannie Mae. Fannie Mae contracted with a predecessor entity of Nationstar to service the loan on Fannie Mae’s behalf.13 12 The time and precise mechanism of the assignment are not alleged in the complaint or otherwise clear from the record. 13 The predecessor entity, known as Seterus, merged with Nationstar in February 2019, with Nationstar as the surviving entity.

Ms. Kemp originally named Seterus as a defendant in her complaint, and Nationstar was subsequently substituted for Seterus as a defendant. For ease of reference, in this opinion we will refer to “Nationstar” as the servicer of Ms. Kemp’s mortgage. 13 2. Default, Inspection Fees, and Loan Modification Ms. Kemp Defaults In 2017, Ms. Kemp fell behind on her mortgage payments. On April 10, 2017, Nationstar declared the mortgage to be in default and threatened foreclosure if she did not cure the default.14 Communications Concerning Nationstar’s Property Inspection Charges On or about July 14, 2017, Ms. Kemp asked Nationstar for certain information about her mortgage.

On or about July 24, 2017, Nationstar replied and disclosed to Ms. Kemp for the first time that her account had been charged “property preservation charges from August 26, 2016 through July 24, 2017.” On September 6, 2017, Ms. Kemp asked Nationstar for more information regarding the property preservation charges. Nationstar replied on September 25, 2017, stating that Ms. Kemp owed $180 in property inspection fees that would be included as part of the payoff total for her mortgage. Another letter by Nationstar, dated September 26, 2017, stated that the deed of trust authorized it to conduct property inspections and to charge related fees when an account is more than 45 days delinquent, and every 30 days thereafter if the delinquency continues, to verify that the property is occupied and in good repair. 14 Ms. Kemp’s personal liability on the loan had been extinguished in 2011 as a result of a discharge in bankruptcy. Her home remained subject to the terms of the deed of trust. 14 Loan Modification In the meantime, in a letter dated July 20, 2017, Nationstar, on behalf of Fannie Mae, had offered Ms. Kemp a trial loan modification plan that required her to make three payments at the beginning of September, October, and November 2017.

Ms. Kemp accepted the trial plan and made the payments required by the trial plan. On November 8, 2017, Nationstar, on behalf of Fannie Mae, offered Ms. Kemp a loan modification. The loan modification agreement, which was drafted by Nationstar on behalf of Fannie Mae, identified Fannie Mae as the “lender.” Ms. Kemp agreed to the loan modification in the belief that the offer included only amounts that Nationstar was lawfully entitled to charge. However, the loan modification agreement had capitalized the property inspection fees into the mortgage principal.15 B. Litigation Concerning the Property Inspection Fees 1.

Complaint In December 2017, Ms. Kemp filed a complaint against Fannie Mae and Nationstar in the Circuit Court for Montgomery County. The complaint, as amended a month later, included one count under the federal Truth in Lending Act, 15 U.S.C. §1601 et seq., and five counts based on State law, including CL §12-121 and the MCDCA. Each count of the 15 Nationstar apparently had a practice of imposing inspection fees in connection with the mortgages it serviced in Maryland through another of its subsidiaries. Subsequent to the events in this case, it entered into an Assurance of Discontinuance with the Consumer Protection Division in which it agreed to cease and desist from assessing such fees and to make restitution of fees assessed with respect to those mortgages.

Consumer Protection Division v. Nationstar Mortgage LLC (May 14, 2018). 15 complaint was based on the contention that Fannie Mae, and Nationstar as its agent, were prohibited from assessing the property inspection fees against Ms. Kemp. The complaint sought to have the case certified as a class action on behalf of other similarly situated borrowers. Some counts of the complaint alleged claims against both Fannie Mae and Nationstar; other counts asserted a claim against only one of the defendants.16 During the course of this litigation Fannie Mae and Nationstar have been represented by the same counsel, who have made the same filings and arguments on behalf of both. Because the allegations of the complaint are based on actions that Nationstar took as servicer of Ms. Kemp’s loan on behalf of Fannie Mae, for ease of reference we will refer to Nationstar in the remainder of this opinion when discussing filings and legal arguments made on behalf of both defendants in the complaint – who are also the Petitioners and Cross-Respondents 16 Count I sought declaratory and injunctive relief against both Fannie Mae and Nationstar with respect to collection of property inspection fees.

Count IV sought statutory damages from both Fannie Mae and Nationstar with respect to those fees under CL §12- 114 of the Maryland Usury Law. The other three counts alleging State law violations were brought against Nationstar alone. Count II asserted a claim of unjust enrichment with respect to past collections of property inspection fees. Count III asserted a claim under the MCDCA and Maryland Consumer Protection Act with respect to the property inspection fees.

Count V alleged that the assessment of the property inspection fees violated the Maryland Mortgage Fraud Protection Act, Maryland Code, Business Regulation Article, §7-401 et seq. The claim in Count VI under the federal Truth in Lending Act was asserted against both Fannie Mae and Nationstar or alternatively, if the court were to determine that Fannie Mae was the only appropriate defendant under that law, against Fannie Mae alone. 16 in this appeal. We will refer to them individually only when the discussion involves a distinction between their capacities as assignee (Fannie Mae) and servicer (Nationstar). 2. Removal to Federal Court and Remand Nationstar removed the case to the United States District Court for the District of Maryland, where Ms. Kemp filed the Second Amended Complaint, which included the same counts as the prior amended complaint.

The federal court granted Nationstar’s motion to dismiss the federal law claim and remanded the State law claims to the Circuit Court. 3. Dismissal of State Law Claims Once back in the Circuit Court, Nationstar moved in July 2018 to dismiss the State law claims. Following a hearing on September 13, 2018, the Circuit Court granted Nationstar’s motion to dismiss in a Memorandum and Order dated October 19, 2018.17 The Circuit Court concluded that neither Fannie Mae nor Nationstar was subject to the prohibition in CL §12-121 because neither fit the definition of “lender” in CL §12-121(f). Accordingly, it dismissed the State law claims of the complaint.

In addition, the court reasoned that the letters sent by Nationstar to Ms. Kemp were not attempts to collect a debt and thus were not within the purview of the MCDCA.18 17 The Memorandum and Order mistakenly cites the Secondary Mortgage Loan Law and a case interpreting that law, illustrating how the title of that law can mislead even a sophisticated reader. Memorandum and Order at 6 n.4; see footnote 4 above. However, that erroneous reference did not affect the substance of the Circuit Court’s reasoning. 18 The Circuit Court also held that, to the extent Ms. Kemp alleged a claim under the Maryland Consumer Protection Act, it was purely derivative of her claim under the 17 4. Appeal Ms. Kemp appealed.

The Court of Special Appeals reversed the rulings of the Circuit Court in part and affirmed them in part. 248 Md. App. 1 (2020). After examining CL §12-121, its context in the Maryland Usury Law, the legislative history of that law, and related Maryland case law, the Court of Special Appeals concluded that the prohibition against inspection fees in CL §12-121 applies to an assignee of a mortgage loan. Accordingly, the intermediate appellate court reversed the Circuit Court’s dismissal of Ms. Kemp’s claims to the extent that the ruling was based on the premise that CL §12-121 did not apply to Fannie Mae or its servicer, Nationstar.19 248 Md. App. at 19 - 28. However, the Court of Special Appeals affirmed the Circuit Court’s dismissal of the claim under the MCDCA, based on different reasoning than that of the Circuit Court.

Relying on its prior decisions applying the MCDCA in Chavis v. Blibaum Associates, P.A., 246 Md. App. 517, 529 (2020), cert. granted, 471 Md. 100 (2020), and Allstate Lien & Recovery Corp. v. Stansbury, 219 Md. App. 575, 591 (2014), aff’d on other grounds, 445 Md. 187 (2015), the intermediate appellate court concluded that dismissal of the MCDCA claim was appropriate on the theory that MCDCA prohibits the use of an illegal “method” MCDCA. In addition, the court held that the complaint lacked the requisite particularity to state a claim under the Maryland Mortgage Fraud Prevention Act. 19 The intermediate appellate court also reversed the Circuit Court’s dismissal of the unjust enrichment claim and the claim under Maryland Mortgage Fraud Prevention Act to the extent those rulings were based on an apparent fact finding by the Circuit Court inconsistent with the record and procedural posture of the case. 248 Md. App. at 29-30 . 18 of debt collection, but does not provide a vehicle for attacking the validity of the underlying debt.20 248 Md. App. at 31-38 . We subsequently granted Nationstar’s petition for a writ of certiorari and Ms. Kemp’s cross-petition. III Discussion To resolve this appeal, we must answer the following questions: (1) Does CL §12-121 apply to an inspection fee charged by an assignee of a mortgage?

(2) Did the complaint adequately allege that Nationstar attempted to collect an alleged debt by asserting a right to collect inspection fees with knowledge that the right did not exist, in violation of the MCDCA? A. General Principles Governing Appellate Review 1. Standard of Review of Dismissal of Complaint When deciding whether to grant a motion to dismiss a complaint as a matter of law, a trial court is to assume the truth of factual allegations made in the complaint and draw all reasonable inferences from those allegations in favor of the plaintiff. Ceccone v. Carroll 20 The Court of Special Appeals did not address the question whether Ms. Kemp’s complaint adequately stated a stand-alone claim under the Maryland Consumer Protection Act, on the basis that she had not made that argument in the Circuit Court. 248 Md. App. at 38-39 .

It also affirmed the Circuit Court’s ruling that she had failed to state her claim under the Maryland Mortgage Fraud Prevention Act with sufficient particularity. Id. at 39- 43. Neither of those issues is before us in this appeal. 19 Home Services, LLC, 454 Md. 680, 691 (2017). When an appellate court reviews a trial court’s grant of a motion to dismiss, the appellate court applies the same standard to assess whether the trial court’s decision was legally correct.

Id. Because the resolution of the motion to dismiss turns on a question of law, appellate review is de novo, without any special deference to the trial court. Id. The questions of law at issue in this appeal involve the interpretation of two statutes – the Maryland Usury Law and the MCDCA. 2.

Principles of Statutory Interpretation The goal of statutory interpretation is to “ascertain and effectuate the real and actual intent of the Legislature.” Gardner v. State, 420 Md. 1, 8 (2011). We begin with an examination of the text of a statute within the context of the statutory scheme to which it belongs. Aleman v. State, 469 Md. 397, 421 , cert. denied, 141 S. Ct. 671 (2020). Review of the text does not merely entail putting the words under the microscope by themselves with a dictionary at hand, because words that appear “clear and unambiguous when viewed in isolation” may “become ambiguous when read as part of a larger statutory scheme.” Fisher v. Eastern Correctional Institution, 425 Md. 699, 707 (2012).

A particular section of a statute must be construed in a manner consistent with the larger statute’s object and scope. Blackburn Ltd. P’ship v. Paul, 438 Md. 100, 122 (2014). We also review the legislative history of the statute to confirm conclusions drawn from the text or to resolve ambiguities. In addition, we examine prior case law construing the statute in question.

Aleman, 469 Md. at 421 . Finally, it is important to consider the consequences of alternative interpretations of the statute, in order to avoid constructions that are “illogical or 20 nonsensical, or that render a statute meaningless.” Couret-Rios v. Fire & Police Employees’ Retirement System, 468 Md. 508, 528 (2020). B. Whether CL §12-121 Applies to the Fees Charged by Nationstar 1. Prohibition of Inspection Fees in CL §12-121 The relevant provision of CL §12-121 prohibits the imposition of a “lender’s inspection fee” in connection with a mortgage loan, except in limited circumstances.

CL §12-121(b). The statute defines “lender’s inspection fee” as “a fee imposed by a lender to pay for a visual inspection of real property.” CL §12-121(a). CL §12-121 was added, with several other provisions, to the Usury Law in 1986. Chapter 628, Laws of Maryland 1986.

The impetus for that bill was the perception that closing costs for sales of real property in Maryland were high relative to those in other states. To deal with that problem, in 1985 the Governor appointed a Task Force on Real Property Closing Costs. Report of the Task Force on Real Property Closing Costs (January 1986) at pp.1-4. One of the Task Force’s recommendations was that certain inspection fees often imposed in connection with mortgage loans be limited to circumstances in which such inspections were truly necessary.

Id. at 33-34 (Task Force Recommendation No. 7). The Task Force’s report resulted in various amendments to the Usury Law, including CL §12-121. Although the bill was largely targeted at fees imposed at the origination of a mortgage loan, CL §12-121 and certain other provisions added by the 1986 21 law apply during the life of the loan.21 Nothing in the Task Force’s report, or the legislation that resulted from it, indicated an intent to abrogate the common law rule that an assignee of a loan steps into the shoes of its assignor. Nationstar does not argue that the type of inspection fee that it allegedly charged Ms. Kemp falls within a statutory exemption in CL §12-121 or is otherwise beyond the purview of the statute.22 Rather, Nationstar argues that it is exempt from CL §12-121 because, as the agent of Fannie Mae, the assignee of Ms. Kemp’s mortgage loan, it was not acting on behalf of a “lender” prohibited from charging such fees. 2.

Nationstar’s Asserted Justification for Charging Inspection Fees In its correspondence with Ms. Kemp, in its argument in the Circuit Court, and in this appeal, Nationstar has pointed to paragraph 14 of the deed of trust as its authority to charge property inspection fees.23 That provision reads in pertinent part: “Lender may charge Borrower fees for services performed in connection with Borrower’s default … including, but not limited to, … property inspection … fees…. Lender may not charge fees that are expressly prohibited … by Applicable Law.” The phrase “Applicable Law” is defined to include state statutes, among other laws. CL §12-121, which prohibits the 21 See Taylor v. Friedman, 344 Md. 572 (1997), discussed in Part III.B.5 of this opinion. 22 Nationstar conceded at the hearing in the Circuit Court that the statutory exceptions to the prohibition on inspection fees do not apply to this case. 23 The provision is quoted in full in Part II.A.1 of this Opinion. As indicated there, this deed of trust is on a Fannie Mae form. 22 collection of property inspection fees by a “lender,” is such a state statute.

Nationstar has conceded that, under paragraph 14, the original “lender” – Countrywide – was thus not authorized to charge a property inspection fee under paragraph 14 of the deed of trust. In Nationstar’s view, when Countrywide assigned the deed of trust to Fannie Mae, Fannie Mae became the “lender” under the deed of trust and specifically acquired the “lender’s” rights to charge fees as provided by paragraph 14 of that instrument. Nothing in the deed of trust itself recognizes that an assignee of the “lender” succeeds to the right to charge fees, as authorized and limited by paragraph 14, so it must occur by virtue of the common law rule.24 Nationstar thus relies on the common law rule concerning assignment of mortgages to conclude that Fannie Mae is a “lender” under the deed of trust and authorized to charge fees under paragraph 14 as its basis for charging an inspection fee in this case. However, in Nationstar’s view, Fannie Mae is not a “lender” for purposes of the statutory restrictions on fees charged by a “lender” that are also incorporated in paragraph 14.

Nationstar’s position that Fannie Mae succeeded to the authorization, but not the limitations, on the assessment of fees in paragraph 14, is primarily based on its reading of CL §12-101(f), the general definition of “lender” in the definition section of the Maryland Usury Law. The term “lender” is defined in the deed of trust to mean Countrywide; there is 24 no mention in that document of an assignee of the “lender” in general or of an assignee of Countrywide in particular. 23 3. CL §12-101(f) – Definition of “Lender” Statutory Text During the relevant period, CL §12-101(f) defined “lender” as “a person who makes a loan under this subtitle.”25 The “subtitle” referenced in that definition is the Maryland Usury Law. Noting the reference to making a loan and the absence of the word “assignee” in CL §12-101(f), Nationstar argues that CL §12-121 – which is also part of the Maryland Usury Law – does not apply to an assignee of a mortgage loan – or at least not to Fannie Mae.26 In accordance with our approach to statutory construction, we look to the context of the statutory scheme of which CL §12-101(f) is a part – the Maryland Usury Law. 25 The conduct at issue in this case occurred prior to a 2018 amendment of CL §12- 101(f).

As a result of that amendment, the statute now defines “lender” as “a licensee or a person who makes a loan subject to this subtitle.” Financial Consumer Protection Act of 2018, Chapters 732, 790, Laws of Maryland 2018. A definition of the term “licensee,” also added by the 2018 amendments, encompasses anyone required to be licensed to make loans subject to the Usury Law, whether or not the person is actually licensed. CL §12- 101(g). The substitution of the phrase “subject to this subtitle” for “under this subtitle” at the end of the definition of “lender” appears to be stylistic in nature. 26 Nationstar has argued that CL §12-121 generally does not apply to any assignee of a mortgage loan based on the definition of “lender” in CL §12-101(f).

See Brief of Petitioners/Cross-Respondents at 2 (“Section 12-121’s plain language therefore does not include a mortgage purchaser …”); id. at 14-17, 23-24; Reply Brief of Petitioners/Cross- Respondents at 2 (“Section 12-101(f)’s Definition of ‘Lender’ Does Not Include Mortgage Assignees Or Servicers”). However, at times in its briefs and at oral argument, Nationstar appeared to make a narrower claim – (1) that an assignee of a mortgage loan could be covered by the definition in CL §12-101(f) if it otherwise originated a loan (i.e., “made” a loan, in Nationstar’s view) at some time to someone else but (2) that Fannie Mae would never fall into that category because it is prohibited by federal law from originating loans under 12 U.S.C. §1719 (a)(2). Nationstar never fully articulates that narrower argument, perhaps because the notion that an assignee would qualify as a “lender” for a particular loan simply because it happened to 24 Statutory Context The Legislature’s use of the word “lender” in the Maryland Usury Law is not limited to CL §12-121. The term “lender” is used throughout that law in specifying restrictions that the Usury Law sets on the terms of loans of money, not just mortgage loans.27 In some parts of the subtitle, that word is used in provisions that regulate the lending entity’s conduct before or when the loan is extended.

CL §12-106(b), for example, requires the “lender” to furnish to “the borrower” a written statement with specified information before the loan contract is executed. Similarly, CL §12-127(b) specifies matters that the “lender” must consider before making a mortgage loan. These provisions clearly focus on persons who originate (or are about to originate) a loan. Thus, for these particular provisions, reading “lender” to include only the originator of a loan would not be inconsistent with the Legislature’s intent to regulate a lending entity’s conduct at the origination stage.

Other parts of the Usury Law, however, clearly regulate conduct that occurs later in the life of the loan. They also use the term “lender.” CL §12-126(c), which applies when a borrower prepays a loan before the expiration of the term of the loan, requires the “lender” to give the borrower a refund or credit for the unearned portion of precomputed interest. CL §12-105(d) prohibits a “lender” from imposing a penalty or other charge on borrowers have originated (“made”) a loan to someone at some other time unrelated to the transaction in question seems illogical. 27 As the Court of Special Appeals recounted, numerous other provisions of the Usury Law regulate the actions of a “lender.” E.g., CL §12-108 (charging of points); CL §12-113 (anti-discrimination provision); CL §12-124 (insurance required of borrower); CL §12-126 (pre-payment penalty). See 248 Md. App. at 15-17 . 25 who prepay their mortgages.

CL §12-109.1 sets forth the process that a “lender” or “servicer” must follow if it determines that the borrower must increase escrow payments under a first mortgage or deed of trust. CL §12-115 regulates a “lender’s” repossession of goods that secure a loan. CL §12-106(c) generally requires a “lender” to provide the borrower with annual statements of payments made and principal amounts due on residential real property loans. These provisions, which appear to apply over the life of a loan, suggest that the term “lender” includes not only an originator of a loan but also an assignee.

Thus, whether the term “lender” in CL §12-101(f) is limited to the originator of a mortgage loan or also encompasses an assignee of the originator is at best unclear; viewed in the context of its usage throughout the Usury Law, the term is ambiguous. We therefore consider the legislative history of the Maryland Usury Law to discern the “real and actual intent” of the Legislature. Legislative History of CL §12-101(f) As recounted earlier, the Maryland Usury Law has a long lineage dating back to colonial times. For centuries, the Usury Law had not included a specific definition of “lender.” But, as outlined earlier, it was clear that the Usury Law regulated the conduct of a person who was assigned a loan, not just the originator of the loan – presumably on the well-accepted principle that an assignee succeeded to the rights and obligations of its assignor with respect to the loan.

Indeed, since at least 1824, the Maryland Usury Law has included a section that relieved an assignee of liability under that law if the assignee took the assignment for bona fide and legal consideration without notice of the violation of that 26 law. See Chapter 200, Laws of Maryland 1824, codified as revised at CL §12-112. The clear implication of that provision – consistent with the common law – is that an assignee who takes an assignment with notice of a restriction under the Usury Law is subject to such liability.28 See Thompkins v. Mountaineer Investments, LLC, 439 Md. 118 , 132 n.12 (2014); Arrington v. Colleen, Inc., 2001 WL 34117735 at ⁹ (D. Md. 2001). The definition of “lender” in CL §12-101(f) was first added to the Maryland Usury Law as part of a new definitions section of that law when the Usury Law was re-codified as part of code revision in 1975 into the then-new Commercial Law Article.29 Chapter 49, §3, Laws of Maryland 1975.

As is generally the case in code revision, the Commission that drafted the re-codified law did not intend to make any substantive change to the existing Usury Law and so informed the General Assembly in its report. Specifically, the Commission stated that the recodification of the Usury Law in CL §12-101 et seq. was “designed to clarify, but not change, the existing law.” Commission Report No. 1975-1 of the Governor’s Commission to Revise the Annotated Code at p. 16. The recodification took into account the interpretations of that law in the decisions of this Court and in the published opinions of the Attorney General. Id.

A few years later, this Court confirmed that the recodification of the Maryland Usury Law as part of the Commercial Law Article 28 In this regard, it cannot be said that an assignee lacks notice of a statutory restriction incorporated in a loan agreement. 29 The opinion of the Court of Special Appeals in this case contains an excellent summary of the provisions of the Usury Law and its placement among various other consumer finance laws as a separate subtitle in Title 12 of the Commercial Law Article. See 248 Md. App. at 14-19 . 27 did not affect the substance of that law. Hoffman v. Key Federal Savings & Loan Ass’n, 286 Md. 28, 37, 42-43 (1979). Given that the recodification with the new general definitions section of the Usury Law was not intended to change that law, it is evident that the code revisors included a definition of “lender,” as well as of certain other terms, in an effort to avoid making what might otherwise appear to be substantive changes in one of the various consumer finance laws included in the new Commercial Law Article.

The Revisor’s Notes to the definitions sections in the code revision bill bear this out. For example, the Revisor’s Note to the new definition of “lender” in CL §12-101(f) states that “[t]his subsection is new language added to indicate that, in this subtitle [i.e., the Maryland Usury Law], the term “lender” relates only to a person who lends money under the provisions of this subtitle and not, for example, under any other credit law.” Chapter 49, §3, Laws of Maryland 1975 at p. 378 (emphasis added). Thus, the addition of this definition to the Usury Law was the code revisors’ effort to ensure that a law once isolated in its own article of the code (former Article 49) would reside without unnecessary confusion in proximity to other laws in the new Commercial Law Article that used the same term for different purposes. 30 Otherwise, the definition of 30 In general, each of the 36 articles of the most recent revision of the Maryland Code begins with a section that sets forth definitions that apply across multiple titles of the particular article of the code. The Commercial Law Article is one of three that does not (the others are the Courts & Judicial Proceedings Article and the Natural Resources Article).

Presumably, this is because the code revisors elected to devote Titles 1 through 10 of the Commercial Law Article to the Maryland version of the Uniform Commercial Code, a model law adopted by most states that consists of 10 titles, and thus avoid a nightmare for future generations of Maryland lawyers if the numbering systems did not correlate to the uniform code. (The Courts & Judicial Proceedings Article and the Natural 28 “lender” in CL §12-101(f) – “a person who makes a loan under this subtitle” – is tautological, much like the definition of “borrower” that was also added by the revisors. See CL §12-101(b) (“a person who borrows money under this subtitle”). From the revisors’ perspective, the key words in both of those definitions were “under this subtitle” as that phrase made clear that those who were regulated or benefited by the Usury Law as recodified were the same as before the recodification.31 Consequences of Nationstar’s Interpretation for the Usury Law If Nationstar’s argument is correct, the Legislature quietly made two very significant substantive changes to both the Usury Law and the common law during code revision in 1975 when it added the “lender” definition to the Usury Law: First, under Nationstar’s argument, the Legislature implicitly abrogated the longstanding common law rule that an assignee of a loan succeeds to the same rights and limitations as its assignor – in the case of an initial assignment, the person who originated the loan.

Second, it implicitly exempted an assignee of any loan from most of the restrictions of the Usury Law. As to whether the Legislature’s adoption of the “lender” definition implicitly abrogated the common law on assignments, it is a standard canon of statutory construction Resources Article, the first two articles created as a result of code revision, were both enacted in 1973 before a style manual had been developed for the project). 31 This is also made evident by the fact that the code revisors included identical definitions of “lender” for other laws recodified in the Commercial Law Article. However, in each of those definitions, the identical phrase “under this subtitle” carried a different meaning because it referred to a different finance law. See, e.g., CL §12-201(b) (1975) (defining “lender” for purposes of the Maryland Small Loan Law); CL §12-301(c) (1975) (defining “lender” for purposes of the Maryland Consumer Loan Law). 29 that statutes are not construed to repeal the common law by implication.

See United Bank v. Buckingham, 472 Md. 407, 433 (2021) (“It is a generally accepted rule of law that statutes are not presumed to repeal the common law further than expressly declared[.]”); State v. North, 356 Md. 308, 311-12 (1999) (although the General Assembly may abrogate the common law, a repeal will not be implied unless “plainly pronounced”). There is no indication in the legislative history of the 1975 code revision of any intention to change the common law rule on assignment of a loan, much less an intention that was “plainly pronounced.” Nor is there any indication of a legislative purpose behind such a change – for example, that the Legislature thought that borrowers of loans that had been assigned were in any less need of protection than borrowers whose loans remained with the original lending entity. Given the ease and frequency with which loans are assigned – and have long been assigned in Maryland – it is very unlikely that the Legislature intended to change the common law so substantially without making such a purpose clear. Similarly lacking is any indication that the Legislature intended to narrow the scope of the Usury Law by inserting a gaping loophole in those provisions that use the term “lender” in the context of post-origination conduct.

The consequences that would follow from Nationstar’s proposed interpretation of CL §12-101(f) with respect to mortgage loans include the following: ● Prepayment credits. A homeowner who prepays a mortgage loan would be entitled to a refund or credit of the unearned portion of the precomputed interest charge 30 only from the originator of the mortgage but not from an assignee.32 In this case, if Ms. Kemp prepaid the mortgage after its assignment, she would have to look to Countrywide for a refund, not to Nationstar. ● Prepayment penalties. A homeowner who prepays a mortgage loan could not be charged a penalty by the originator of the loan, but could be charged such a penalty by an assignee of the loan.33 In this case, if Ms. Kemp prepaid the mortgage after its assignment, Nationstar would not only owe no refund or credit, but also could charge her a penalty for prepaying the loan while Countrywide could not have done so. ● Refunds of excess escrow balance. The statutory procedures for obtaining a refund of an excess balance that a borrower has paid into an escrow account that relates to a mortgage loan (for the payment of taxes, insurance and other expenses related to the loan) would apply only if the originator of the loan still holds the loan.34 In this case, Ms. Kemp would have to look to long-gone Countrywide, not Nationstar, for such a refund. ● Loan statements.

The originator of a mortgage loan, but not the assignee, would be required to provide a statement to the borrower, at least annually, concerning how the 32 See CL §12-126(c) (“In the event of prepayment of the entire loan, the lender shall refund or credit to the borrower the unearned portion of the precomputed interest charge.”) (emphasis added). 33 See CL §12-105(d) (“In connection with a mortgage loan, a lender may not require or authorize the imposition of a penalty, fee, premium, or other charge in the event the mortgage is prepaid in whole or in part.”) (emphasis added). 34 See CL §12-109.1(d) (“A refund of any excess amount shall be made … [w]ithin 60 days after receipt by the lender of the borrower’s request for a refund …”) (emphasis added). 31 borrower’s payments were credited and the remaining unpaid principal balance.35 In this case, Countrywide, but not Nationstar, would be required to provide such statements on the use of payments and the status of the loan balance to Ms. Kemp. ● Exemptions from escrow account requirements. Some provisions of the Usury Law would be nonsensical if an “assignee” of a loan was necessarily distinct from a “lender,” as they refer to a “lender” who purchases (i.e., takes assignment of) a loan.36 There would also be consequences for other types of loans. For example: ● Repossession procedures. The Usury Law’s provisions concerning repossession of goods securing a loan would apply to the originator of that loan, but not to an assignee of the loan.37 ● Interest rates.

An interpretation of the term “lender” that excludes an assignee could limit the permissible interest rate that a lender could set.38 35 See CL §12-106(c) (“At least annually …, a lender who receives scheduled monthly periodic payments on … loans secured by an interest in real property shall furnish to the borrower a written statement …”) (emphasis added). 36 See, e.g., CL §12-109(d) (exemption from certain escrow account requirements applicable to “out-of-state lender” that purchases a loan, but exemption does not apply to “Maryland lender” that later purchases the same loan). See, e.g., CL §12-115(a)(1) (“A lender may repossess goods securing a loan …”) 37 (emphasis added). 38 See CL §12-103(a)(3)(iii) (making certain higher permissible interest rates contingent on the “lender’s” compliance with repossession provisions of CL §12-115) (emphasis added); CL §12-103(b)(1)(iii) (making certain higher interest rates for mortgage loans contingent on the absence of a prepayment penalty). 32 ● “Usury” and assignees. Under Nationstar’s reading of the definition of “lender,” an assignee would arguably be exempt from regulation under the Usury Law because the definition of “usury” in that law uses the term “lender.”39 It would be anomalous to conclude that the General Assembly made such major substantive changes in the Usury Law by means of a code revision bill that expressly was intended not to change the law – changes apparently undetected for the next 40-plus years. As recounted earlier,40 this Court in applying the Usury Law to mortgage loans in B. F. Saul warned against an interpretation of the statute that would lead to “absurd … consequences.” 250 Md. at 722 .

In this case, such consequences would ensue if the Court were to construe the 1975 code revision to have both abrogated the common law rule that an assignee succeeds to the same rights and obligations as its assignor and substantially narrowed the scope of the Usury Law. None of these anomalous and illogical results pertains if the references to a “lender” are construed consistently with the common law relating to assignment of loans.41 See CL §12-101(m) (defining “usury” as “the charging of interest by a lender in 39 an amount which is greater than that allowed by [the Usury Law]”) (emphasis added). 40 See Part I.A.3 of this opinion. 41 As noted in footnote 26 above, Nationstar has argued, on the one hand, that all assignees are exempt from CL §12-121 and, on the other, that some are exempt and some are not. The first results in the absurd consequences outlined in the text above; the second does not always square with the “plain language meaning” that Nationstar would ascribe to the statute. Moreover, the two arguments are inconsistent with one another.

The Dissenting Opinion, which largely adopts Nationstar’s arguments, does not resolve the inconsistency. 33 4. Use of the Word “Assignee” in CL §12-109.2(a)(3) In support of its interpretation of the term of “lender” in CL §12-101(f), Nationstar also relies on a definition of “lender” that appears in CL §12-109.2(a)(3) and that applies only to that section.42 Noting that the text of CL §12-109.2(a)(3) includes a reference to an “assignee of a lender,” Nationstar draws a negative inference that the definition of “lender” generally applicable in the Usury Law in CL §12-101(f) must not encompass an assignee of a loan originator. The language of CL §12-109.2(a)(3) must be considered in the context in which it appears. It appears in, and applies to, one of the three sections in the Usury Law that concern escrow accounts – accounts in which funds for the payment of taxes, insurance premiums, and other expenses associated with real property are accumulated to pay those bills when they come due.

See CL §12-109(a)(2); 12-109.2(a)(2). 42 CL §12-109.2 provides: (a)(1) In this section the following terms have the meanings indicated. (2) “Escrow account” has the meaning stated in § 12-109 of this subtitle. (3) “Lender” includes a lender and assignee of a lender. (4) “Mortgage” includes a mortgage and a deed of trust.

(b)(1) Funds in any escrow account shall be kept separate from and may not be commingled with the funds of the lender. (2) A lender may place escrow funds received in connection with more than one mortgage into a single escrow account. (3) In the event of the bankruptcy of the lender, any escrow funds placed in any escrow account under this section may not be considered to be part of the bankrupt estate of the lender. (emphasis added). 34 In 1974, the Legislature enacted the first of the escrow account sections, the predecessor of CL §12-109, which requires a “lending institution” that makes a mortgage to pay interest on the escrow account.

Chapter 420, Laws of Maryland 1974. As is evident, this transaction is the opposite of most transactions covered by the Usury Law. With regard to an escrow account, the consumer is, in a certain sense, lending money to the financial institution for the period before the bill is due, and the financial institution pays interest to the consumer. The statute imposed the obligation to pay interest on an escrow account on the financial institution that lent money secured by the mortgage or an “assignee of an expense or escrow account.” The evident purpose was to impose the obligation of paying interest on the entity that had the benefit of the funds held in escrow, whether or not that entity was the originator of the mortgage loan or an assignee of the escrow account.

In 1978, the General Assembly enacted a second section related to escrow accounts, codified at CL §12-109.1, which afforded the borrower more control over the use of excess funds accumulated in an escrow account, including the option to receive a refund of those funds. CL §12-109.1(b)-(c). The prohibitions in that section related to “any escrow account” and the statute imposed certain obligations as to escrow accounts on the “lender or servicer” of a loan. CL §12-109.1(b), (e).

No reference was made in that statute to an assignee of a loan. It is evident from a series of contemporaneous Attorney General opinions that these provisions concerning escrow accounts had raised a number of questions as to the extent to which these statutory obligations followed either the escrow account or the mortgage when an assignment was made, as an escrow account is not necessarily assigned with the 35 mortgage. See, e.g., 60 Opinions of the Attorney General 403 (1975) (discussing, among other things, an example in which a mortgage was assigned to a bank, but the assignor retained servicing and control of the escrow account); 63 Opinions of the Attorney General 438 (1978) (discussing whether an out-of-state assignee of a mortgage loan was subject to the requirement to pay interest on an escrow account and whether the borrower could look instead to the original in-state lender/assignor); 67 Opinions of the Attorney General 104 (1982) (discussing whether a lender’s exemption from the obligation to pay interest on an escrow account also applied to the assignee of the escrow account). Although the Attorney General’s answers to these questions are beside the point here, the fact that the questions were asked demonstrates that the mortgage industry and State regulators were seeking guidance on how the escrow account provisions in the Usury Law applied when there was an assignment of a mortgage, particularly when an escrow account did not accompany that assignment or was later assigned separately.

When the General Assembly later added a third section concerning escrow accounts – CL §12-109.2 – to the Usury Law in 1986 to ban service charges,43 it made clear in the substantive terms of that provision that the limitations imposed with respect to escrow accounts also applied to “a lender, or the assignee of the lender.” CL §12-109.2(b) (1986). When that law was amended a few years later in 1989 to add additional restrictions barring 43 This provision prohibited a lender from imposing collection fees or service charges in connection with an escrow account and was part of the same bill designed to lower closing costs in Maryland that enacted CL §12-121. Chapter 628, Laws of Maryland 1986. 36 commingling of escrow accounts, the reference to “a lender, or the assignee of the lender” was converted to a definition, presumably to avoid having to repeat the phrase repeatedly in the section. There was no indication in the 1986 or 1989 amendments that the General Assembly intended to repeal the common law rule that the assignee of a loan steps into the shoes of the assignor.

If the General Assembly had intended in 1986 to broadly strip borrowers whose loans were assigned of the protection of the Usury Law when it added the definition in CL §12-109.2(a)(3) – a section that regulates only escrow accounts – it did not so state in the purpose paragraph of the title of either the 1986 or the 1989 bills – or anywhere else in the legislative history of CL §12-109.2. 5. Case Law Concerning CL §12-121 This Court had occasion to construe CL §12-121 as applied to the assignee of a mortgage in Taylor v. Friedman, 344 Md. 572 (1997). That case concerned whether the prohibition in CL §12-121 applied to post-default inspection fees in connection with a mortgage loan that had been assigned. The collection fees had been assessed seven years after the closing on the loan.

Although the status of the respondent bank as an assignee of the mortgage loan was obvious from the facts recited in the Court’s opinion, no one apparently thought that made a difference. The bank did not claim that the 1975 code revision had exempted it and other assignees of loans from the Usury Law, and a fortiori from the prohibition in CL §12-121. Rather, the bank in that case focused on the more salient argument that legislation proposed by a task force to deal with high closing costs should not be construed to apply after the closing. 344 Md. at 581-82 . After reviewing the 37 legislative history of the 1986 bill that added CL §12-121 to the Usury Law and noting that its provisions regulated more than the closing of a loan, the Court held that the prohibition in CL §12-121 was not confined to the origination of the loan.

Id. at 584.44 That holding applied to the assignee of the mortgage in Taylor and, given the frequency with which mortgages were assigned by the time of that decision in 1997, would obviously apply to many assignees.45 This Court also addressed assignments under the Usury Law in Thompkins v. Mountaineer Investments, LLC, 439 Md. 118 (2014), although that decision primarily related to liability under a different statute – the Secondary Mortgage Loan Law (“SMLL”).46 In Thompkins, this Court held that an assignee was not liable for a violation of the SMLL committed by the original lender when the loan was originated, but that the assignee was subject to the requirements of the SMLL and would be liable for its own violations of the statute. 439 Md. at 141 . While the Thompkins case concerned application of the SMLL, the Court’s analysis drew on provisions of the Usury Law and the common law of assignment. In the course 44 The Court also noted that the General Assembly had deleted the phrase “as a condition to granting the loan” from the proposed version of CL §12-121(c)(2), which suggested that it intended for the restriction to extend beyond the origination of the loan. 344 Md. at 583-84 . 45 A newspaper article from early 1984 cited in Nationstar’s reply brief reported that at least 43% of new mortgage loans had been assigned. Petitioners/Cross-Respondents Reply Brief at 16-17 n.7. 46 See footnote 4 above. 38 of its opinion, the Court noted that it was unlikely that the General Assembly intended that the protections of the SMLL or the Usury Law could be circumvented simply by assigning a loan. 439 Md. at 132-33 .

The Court also observed that the Usury Law in particular contemplated that an assignee could be liable for violations of that law. Id. at 132 n.12 (“While one section of the statute states that it does not provide a remedy against an assignee of a usurious loan who took the assignment for a ‘bona fide and legal consideration without notice of any usury in its creation’ (CL §12-112), it implicitly allows a usury action to be brought against an assignee that cannot satisfy that condition.”).47 Finally, the Court alluded to the common law principle that an assignee steps into the “shoes” of its assignor, but distinguished the situation in the case before it, which concerned liability for prior violations of the SMLL by the originator of the loan, not the ongoing application of the statute to the assignee. Id. at 139-40. No Maryland appellate decision supports Nationstar’s construction of the purview of CL §12-121.

Instead, Nationstar relies on unpublished trial court decisions of the federal district court, none of which considered the legislative history of the statute.48 The only 47 See also Part III.B.2 of this opinion. 48 In Suazo v. U.S. Bank Trust, NA, 2019 WL 4673450 (D. Md. Sept. 25, 2019), the court held that a count of the complaint in that case alleging a violation of CL §12-121 failed to state a claim because an inspection fee could be lawful if it fell within an exception to the statute and the complaint failed to allege that the inspection fees in question fell outside those exceptions. 2020 WL 4673450 at ⁹-10. The particular mortgage loans involved in the case had been assigned to a special purpose acquisition entity. In the course of its opinion in the case, the court also opined that the entity, as an assignee of the mortgage loans, was not a “lender” under the CL §12-101(f) and therefore not subject to the restrictions on inspection fees, reasoning that “one does not become a ‘mortgage lender’ merely by obtaining title to a mortgage loan.” Id. at ⁸-10. 39 one of those decisions that considered the consequences of that interpretation of CL §12- 101(f) acknowledged that it would render the Maryland Usury Law “functionally toothless.”49 As indicated above, however, the most pertinent Maryland appellate cases indicate that the Usury Law is alive and well. 6. Summary CL §12-121 limits the authority of a person who makes a mortgage loan to charge property inspection fees in connection with that loan.

The common law rule, long applied to assigned mortgages in Maryland, provides that, if the originator of a mortgage loan assigns the loan, the assignee succeeds to the same rights and obligations under the loan agreement as its assignor. When the General Assembly added a definition of “lender” to the Maryland Usury Law as part of a 1975 code revision that made the Usury Law part of That court repeated the same analysis, essentially verbatim, in two other unpublished decisions that the same judge issued simultaneously with Suazo. See Robinson v. Fay Servicing, LLC, 2019 WL 4735431 (D. Md. Sept. 27, 2019) at ⁷-9; Roos v. Seterus, Inc., 2019 WL 4750418 (D. Md. Sept. 30, 2019) at ⁴-6. A few months later, another unpublished decision of the federal district court cited Suazo and the related cases to reach the same conclusion.

Flournoy v. Rushmore Loan Management Services, LLC, 2020 WL 1285504 (D. Md. March 17, 2020) at ⁵-6. The court in Suazo and the related cases did not consider the Maryland common law concerning assignment of mortgages, the structure of the Maryland Usury Law, the fact that the addition of CL §12-101(f) was part of a non-substantive code revision of that law, or the consequence that its interpretation would exempt an assignee of a loan from most of the Usury Law. Indeed, those decisions relied in part on the Circuit Court decision on appeal in this case for their interpretation of the statute. See Roos, 2019 WL 4750418 at ⁵; Flournoy, 2020 WL 1285504 at ⁵.

Accordingly, we do not find Suazo or the cases that repeated its analysis to be persuasive. 49 Flournoy, 2020 WL 1285504 at ⁷. 40 the Commercial Law Article, it did not change that rule. In keeping with the principle that the Court is to harmonize statutory provisions when possible and to presume that the Legislature does not abrogate the common law without making that intention clear, we interpret the term “lender” in CL §12-121 to include an assignee who holds an outstanding loan.50 The argument advanced by Nationstar in this case – that the assignee (Fannie Mae) succeeded to the right of its assignor (Countrywide) to charge fees authorized by paragraph 14 of the deed of trust, but did not succeed to the limitations incorporated in that authorization – would give the assignee greater rights as “lender” under the deed of trust than its assignor, the entity actually defined as “lender” in that instrument. Nationstar finds authorization for the fees in paragraph 14 of the deed of trust, while jettisoning the statutory limitations such as CL §12-121 explicitly incorporated in that authorization.51 The Noting that CL §12-122 provides that a “knowing and willful” violation of CL 50 §12-121 is a misdemeanor, Nationstar argues that CL §12-121 should be construed narrowly not to apply to an assignee of a loan under the “rule of lenity.” The “rule of lenity” is “not a rule in the usual sense, but an aid for dealing with ambiguity in a criminal statute.” Oglesby v. State, 441 Md. 673, 681 (2015). However, it is not so much a canon of statutory construction as a “tool of last resort” when a court despairs of resolving an ambiguity in a statute with the usual tools of statutory construction.

Id. That is not the case here. As the analysis in the text demonstrates, the normal tools of statutory construction are adequate to the task at hand. 51 The only authority cited by Nationstar for this proposition is an unpublished federal district court opinion that stated that an assignee does not “inherit the statutory obligations of the original lender, when such laws regulate the initial maker of the loan regardless of any contractual terms to the contrary.” Flournoy v. Rushmore Loan Management Services, LLC, 2020 WL 1285504 (D. Md. March 17, 2020) at ⁶ (emphasis in original). That opinion did not cite any authority for this proposition, which would appear to open up the possibility that a lender could launder a loan agreement of unwanted statutory provisions incorporated in the agreement (i.e., restrictions imposed by the Usury 41 common law concerning assignment of mortgages does not support such a result.

And, the addition of a definition of “lender” as part of code revision did not change that law. Accordingly, we hold that Fannie Mae (and its agent Nationstar), as assignee of Countrywide, did not acquire any greater right to assess property inspection fees against a borrower like Ms. Kemp than Countrywide itself had under the deed of trust, which limited the authorization to charge fees prohibited by State law.52 Ms. Kemp has adequately pled causes of action based on a violation of CL §12-121. C. Whether the Complaint States a Claim under the MCDCA As outlined above, the complaint in this case includes a count that alleges a violation of CL §14-202(8) of the MCDCA, which would also constitute a violation of the Maryland Law) simply by assigning the loan. That is not Maryland law.

See Post v. Bregman, 349 Md. 142, 156 (1998) (“parties to a contract are deemed to have contracted with knowledge of existing law and … the laws which subsist at the time and place of the making of a contract … enter into and form part of it …”) (internal quotation marks omitted). Moreover, the Flournoy court did not take into consideration the context and history of the Maryland Usury Law or of Maryland common law concerning assignments of mortgage loans. We do not adopt its rationale. 52 In a similar vein, the loan modification instrument that Nationstar drafted and entered into with Ms. Kemp on behalf of Fannie Mae identifies Fannie Mae as the “lender” and uses that term throughout the document to refer to Fannie Mae’s rights and obligations under that agreement. Whether this document is construed to mean that Fannie Mae has made a new loan as part of the loan modification or is the assignee of the originator of the original loan, it would appear to indicate that Fannie Mae (and its agent Nationstar) is subject to the restrictions on inspection fees either in its own right or as the assignee of Countrywide.

If there were any ambiguity in how the provisions in the deed of trust or the loan modification agreement should be construed, under ordinary contract principles, they would be construed against the drafters – in this case, Fannie Mae and Nationstar. Impac Mortgage Holdings, Inc. v. Timm, 474 Md. 495, 508-10 (2021), 2021 WL 2965006 (July 15, 2021) at ⁶. 42 Consumer Protection Act. In its opinion, the Court of Special Appeals noted that some of its past opinions had held that claims under the MCDCA are limited to those concerning “methods” of debt collection, as opposed to the “validity” of the debt being collected. The Court of Special Appeals held that the Circuit Court properly dismissed Ms. Kemp’s claim under the MCDCA because, in the view of the intermediate appellate court, that claim was addressed to the “validity” of the underlying debt (i.e., the property inspection fees), rather than the “method” by which Nationstar was attempting to collect that debt. 248 Md. App. at 35-38 .53 On appeal, Ms. Kemp contends that the MCDCA is not limited to “methods” of debt collection.

Nationstar takes the contrary position and further argues that, even if subsection (8) applies to its effort to collect the property inspection fees, Ms. Kemp failed to meet “her burden of alleging and proving that [Nationstar] had ‘knowledge’ that the right it threatened to enforce ‘did not exist.’”54 53 We agree with the Court of Special Appeals that the Circuit Court’s conclusion that letters sent by Nationstar to Ms. Kemp did not constitute an attempt to collect a debt was dubious at best. 248 Md. App. at 33-35 . Nationstar has not pressed that argument before us. 54 We note parenthetically that, at this stage of the case – appellate review of the grant of a motion to dismiss – a plaintiff bears no burden of “proving” a claim. Rather, the complaint must allege facts that, if true, could prove the claim. See Part III.A.1 of this opinion above. 43 1.

Whether the MCDCA is Limited to “Methods” of Debt Collection The MCDCA prohibits a debt collector from engaging in certain conduct when “collecting or attempting to collect an alleged debt.” The particular provision at issue before us is CL §14-202(8). That subsection reads as follows: In collecting or