Bankruptcy – Attorney’s Fees – Notice – Proof of Claim – Waiver – Foreclosure

In Re: Saeed. (Lawyers Weekly 10-05-0944, 6 pp.) (Thomas W. Waldrep Jr., J.) M.B.N.C.

Holding: Because it failed to mail a statement to the debtor that clearly and conspicuously explained the attorney’s fees it sought in its claim, the note-holder did not provide sufficient notice to the debtor of its assessment of attorney’s fees pursuant to G.S. § 45-91(1). This failure constitutes a waiver of such fees under G.S. § 45-91(3).

Facts

Habitat for Humanity was the holder of two notes secured by the debtor’s residence. Following the debtor’s default on both notes, Habitat commenced foreclosure proceedings. The foreclosure was stayed by the debtor’s bankruptcy filing.

Habitat filed a proof of claim that included $8,102 in pre-petition attorney’s fees, nearly all of which allegedly related to the foreclosure process. The debtor objected to the portion of the proof of claim relating to attorney’s fees on the grounds that Habitat failed to provide sufficient notice of the fees to her under G.S. § 45-91, that the claim did not specify which fees were pre-petition and which fees were post-petition, and that the fees were unreasonable.

Habitat provided a breakdown of the fees in response to the debtor’s objection and said its proof of claim served as sufficient notice to the debtor.

Analysis

Because Habitat made, held and serviced the debtor’s loan, and the loan was secured by the debtor’s residence, Habitat was the “servicer” of a “home loan” under G.S. § 45-91 and was therefore subject to the notice requirements of G.S. § 45-91(1).

While Habitat argued that the proof of claim served as notice of the attorney’s fees, the plain language of G.S. § 45-91(1) requires that notice be “explained clearly and conspicuously in a statement mailed to the borrower at the borrower’s last known address within 30 days after assessing the fee.”

This must be done “regardless of whether the loan is considered in default or the borrower is in bankruptcy or the borrower has been in bankruptcy.”

The statute requires that notice of such fees be sent to the debtor’s last known address and also that the fees are explained clearly and conspicuously. Habitat’s proof of claim fulfills neither of these requirements.

The first mention of attorney’s fees to the debtor’s was made in Habitat’s proof of claim, which was filed with the court and not mailed to the debtor directly.

Habitat has not fulfilled the notice requirements of G.S. § 45-91(1).

G.S. § 45-91(3) further provides that failure to provide notice in the manner described under subsection (1) constitutes waiver of the fee claimed. By failing to provide notice in the manner prescribed, Habitat has effectively waived its right to assess the attorney’s fees against the debtor.

Habitat is not entitled to recover the $8,102 in attorneys’s fees listed in its claim.