Earlier this month, the Fourth DCA of Florida reversed a circuit court’s dismissal of Lakeview Loan Servicing, LLC’s (“Lakeview” or “the Bank”) foreclosure complaint. Lakeview Loan Servicing v. Walcott-Barr . The DCA found the Bank presented sufficient evidence to show it complied with pertinent HUD regulations, specifically § 203.604(d ), so dismissal based on failure to satisfy conditions precedent was inappropriate.
The Court’s opinion (and the concurring opinion written by Judge Gross) included considerable discussion of the Court’s recent PennyMac decision wherein the Court distinguished HUD requirements from other statutory conditions precedent. (citing and quoting PennyMac Loan Services LLC v. Ustarez ) In PennyMac, the Court explained if the note or mortgage incorporated HUD regulations then “the lender ‘contractually agreed to self-impose the HUD regulation on itself before…foreclosing…”, but the Court distinguished that obligation from a condition precedent. Judge Gross vehemently disagreed with this characterization, noting it was a distinction without a difference, but his concurring opinion elaborating on the issue is outside this article's scope.
In Walcott-Barr, the borrowers’ loan documents incorporated references to HUD, thereby making compliance with HUD regulations a “contractual pre-condition to foreclosure.” In response to Lakeview’s foreclosure complaint, the borrowers (“Walcotts” or “Borrowers”) asserted as an affirmative defense that the Bank failed to comply with the face-to-face meeting requirement of § 203.604(d). Under that section, the mortgagor was required to conduct a face-to-face interview with the borrowers within three months of default or “make a reasonable effort” to do so. To be considered “reasonable,” according to HUD, Lakeview had to send at least one certified letter to the borrower requesting a meeting and take at least one trip to the mortgaged property.”
At trial, the Bank presented testimonial evidence that it mailed out a letter via certified mail requesting a face-to-face meeting with the borrowers. The witness confirmed the letter was addressed to the borrowers at the property address, and the witness provided the “USPS certified mail tracking number.” The Bank introduced a copy of the letter into evidence but not the “return receipt” card. The trial court found Lakeview “presented sufficient circumstantial evidence that a representative tried to meet the Borrowers personally;” however, it also found “the omission of a return receipt from the USPS [was] fatal” to the Bank’s case. The court entered judgment for the Borrowers and dismissed the case. Lakeview appealed that order.
On appeal, the Fourth DCA disagreed with the lower court’s conclusion that the absence of the return receipt card rendered Lakeview’s evidence deficient. The Court analyzed the plain language of the statute which stated in pertinent part that “the reasonable effort [to conduct a face-to-face meeting] ‘shall consist…of one letter sent to the mortgagor certified by the Postal Service as having been dispatched.’” The Court expounded that the term “certify” meant to “…attest to as being true…” and the word “dispatch” meant “…the act of sending off…”
Based on the plain language of the statute, the Court concluded Lakeview’s witness testimony (1) identifying the letter requesting a face-to-face meeting, (2) confirming the letter was sent to the Borrowers’ at the property address via USPS certified mail, and (3) providing the tracking number “was sufficient to establish [the Bank made] a ‘reasonable’ effort’ under 24 C.F.R. § 203.604(d).” The Court elaborated that compliance with the face-to-face meeting was not limited to the “introduction of the USPS green card.” The Court also looked to an analogous Illinois case where that court found the bank’s failure to produce the “USPS proof” of mailing “did not bar foreclosure because it was a ‘technical defect’ that did not prejudice the borrower.
The Court reversed the order of dismissal and remanded the matter for further proceedings consistent with its findings.