Harris v. U.S. Bank Nat'l Ass'n

• Citation: 223 So.3d 1030
• Decision Date: 10 March 2017
• Docket Number: CASE NO. 1D15–2022
• Parties: Sarah J. HARRIS and Bradley C. Harris, Appellants, v. U.S. BANK NATIONAL ASSOCIATION, as Trustee for the Certificate Holders of the LXS 2007–16N Trust Fund, Appellee.
• Court: Florida District Court of Appeals

223 So.3d 1030

Sarah J. HARRIS and Bradley C. Harris, Appellants,

v.U.S. BANK NATIONAL ASSOCIATION, as Trustee for the Certificate Holders of the LXS 2007–16N Trust Fund, Appellee.

CASE NO. 1D15–2022

District Court of Appeal of Florida, First District.

Opinion filed March 10, 2017

Rehearing Denied June 2, 2017

Mark P. Stopa of Stopa Law Firm, Tampa, for Appellants.

Shaib Y. Rios of Brock & Scott, PLLC, Fort Lauderdale, for Appellee.

PER CURIAM.

In granting final judgment on U.S. Bank National's foreclosure complaint against Sarah and Bradley Harris (whom we'll call "the Borrowers"), the trial court held that a HUD regulation was a condition precedent to foreclosure, but that the Borrowers failed to raise the issue and timely challenge the Bank's noncompliance with the regulation. We affirm.

I.

The Bank sought to foreclose a mortgage secured by a promissory note issued to the Borrowers. As an FHA loan, the note contained the following provision:

If Borrower defaults by failing to pay in full any monthly payment, then Lender may, except as limited by regulations of the Secretary in case of payment defaults , require immediate payment in full of the principal balance remaining due and all accrued interest. ... In many circumstances regulations issued by the Secretary will limit Lender's rights to require immediate payment in full in the case of payment defaults. This note does not authorize acceleration when not permitted by HUD regulations .

(Emphasis added). The mortgage established the Bank's remedies upon default by the Borrowers, including limitations subject to HUD regulations:

Grounds for Acceleration of Debt.

(a) Default. Lender may, except as limited by regulations issued by the Secretary, in the case of payment defaults, require immediate payment in full of all sums secured by this Security Instrument if:

...

(d) Regulations of HUD Secretary. In many circumstances regulations issued by the Secretary will limit Lender's rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary.

(Emphasis added). The regulation at issue in this case provides for a face-to-face interview with a mortgagor under certain scenarios:

(b) The mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid. ...

(c) A face-to-face meeting is not required if:

(1) The mortgagor does not reside in the mortgaged property,

(2)The mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either ,

(3) The mortgagor has clearly indicated that he will not cooperate in the interview,

(4) A repayment plan consistent with the mortgagor's circumstances is entered into to bring the mortgagor's account current thus making a meeting unnecessary, and payments thereunder are current, or

(5) A reasonable effort to arrange a meeting is unsuccessful.

(d) A reasonable effort to arrange a face-to-face meeting with the mortgagor shall consist at a minimum of one letter sent to the mortgagor certified by the Postal Service as having been dispatched. Such a reasonable effort to arrange a face-to-face meeting shall also include at least one trip to see the mortgagor at the mortgaged property, unless the mortgaged property is more than 200 miles from the mortgagee, its servicer, or a branch office of either, or it is known that the mortgagor is not residing in the mortgaged property.

24 C.F.R. § 203.604 (emphasis added).

The Bank's complaint did not allege compliance with this HUD regulation or any others, but the Borrowers neither moved to dismiss for the Bank's non-compliance nor asserted non-compliance as an affirmative defense. For its part, the Bank took the position that—even if the Borrowers' other affirmative defenses could be construed to include non-compliance with HUD regulations—such regulations are not conditions precedent to a foreclosure action.

The trial lasted less than two hours, the only witness being the Bank's litigation analyst, Mr. Huff. On cross-examination, he testified he was without knowledge as to whether a Bank representative went to the property to speak to the Borrowers regarding the default. On re-direct, however, he said no attempt was made to have a face-to-face meeting with the Borrowers because that HUD requirement applied only when a Bank servicing branch is within 200 miles of the property, which is not the case here. He expressed his confidence "that we have followed all servicing guidelines and procedures pursuant to this foreclosure action." This was the extent of testimony about compliance with HUD regulations.

During closing arguments, the Borrowers raised for the first time the Bank's argument that HUD regulations did not apply, arguing that non-compliance with HUD regulations is a defense. The Bank countered that the "face-to-face meeting" did not apply because no branch existed within 200 miles of the property. The trial court ruled in favor of the Bank...