Lakeview Loan Servicing, LLC v. Walcott-Barr

• Decision Date: 14 October 2020
• Docket Number: No. 4D19-1582,4D19-1582
• Citation: 307 So.3d 705
• Parties: LAKEVIEW LOAN SERVICING, LLC, Appellant, v. Santia Lashawn WALCOTT-BARR and Mark Livingston Barr, Appellees.
• Court: Florida District Court of Appeals

307 So.3d 705

LAKEVIEW LOAN SERVICING, LLC, Appellant,

v.Santia Lashawn WALCOTT-BARR and Mark Livingston Barr, Appellees.

No. 4D19-1582

District Court of Appeal of Florida, Fourth District.

[October 14, 2020]

Paul J. McCord of Deluca Law Group, PLLC, Fort Lauderdale, for appellant.

Malcolm E. Harrison and Michelle Moore, Wellington, for appellees.

Kuntz, J.

Lakeview Loan Servicing, LLC appeals the circuit court's involuntary dismissal of its foreclosure complaint against the Borrowers, Santia Lashawn Walcott-Barr and Mark Livingston Barr. The circuit court found Lakeview violated the requirements of a United States Department of Housing and Urban Development regulation, 24 C.F.R. § 203.604(d) (2019), because it failed to introduce evidence from the United States Postal Service as proof of compliance. We reverse the circuit court's involuntary dismissal.

Background

Lakeview filed a foreclosure complaint alleging the Borrowers owed $318,685.56 plus interest on a note and mortgage. The Borrowers answered the complaint, asserting seven affirmative defenses including Lakeview's failure to comply with 24 C.F.R. § 203.604.

At trial, a loan litigation resolution specialist with Loan Care, LLC, Lakeview's servicing agent, testified that she managed Loan Care's foreclosure litigation and reviewed business records for trials, depositions, and settlements. The specialist explained that Loan Care used a third-party vendor, NCP Solutions, to mail out its letters. Although she never worked for NCP, she was trained in NCP's procedures. NCP sent a data file to Loan Care for approval, and once Loan Care's "letter librarian" approved the letter, NCP proofed it, printed it, and mailed it. Once mailed, NCP scanned and saved the letter into a database housing all of Loan Care's letters. The Loan Care specialist testified that all letters were "scanned with mail codes." She also had personally visited the USPS facility where NCP took its letters for mailing.

Relevant to this case, the Loan Care specialist identified the letter requesting a face-to-face meeting that was sent to the Borrowers by certified mail. The letter was admitted as an exhibit without objection. The Loan Care specialist testified that the letter was "the letter typically sent on FHA loans." It was sent "[b]ecause it's required under the preconditions for foreclosure. We have to try to meet with the borrower face-to-face." The Loan Care specialist stated that the letter was: addressed to the Borrowers, sent to the property address, and sent by USPS certified mail. As additional confirmation that the letter was sent by certified mail, the witness identified the USPS certified mail tracking number.

The Borrowers, a husband and wife, testified. The wife acknowledged signing the note and mortgage. She testified that although she received loan mitigation documents and correspondence about force-placed insurance, she did not recall receiving letters through certified mail from Lakeview. The husband acknowledged the mortgage was in default but denied knowing anything else, because his wife handled everything.

At the close of Lakeview's case-in-chief, the Borrowers moved for involuntary dismissal, alleging Lakeview failed to satisfy a condition precedent to bringing the foreclosure suit. They stated paragraph 9(a) and (d) of the mortgage contained provisions incorporating HUD regulations:

(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 ....

...

(d) Regulations of HUD Secretary. In many circumstances regulations issued by the Secretary will limit Lender 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.

The Borrowers maintained that one HUD regulation, 24 C.F.R. § 203.604, required Lakeview to hold a face-to-face interview with the mortgagor or "make a reasonable effort" to hold one "before three full monthly installments due on the mortgage are unpaid." They asserted doing so was a condition precedent to bringing the foreclosure suit.

They argued they were entitled to an involuntary dismissal because there was not a face-to-face interview. Nor could Lakeview avail itself of any of the exceptions to holding the interview. The Borrowers argued Lakeview had not shown it made reasonable efforts to schedule an interview by a certified letter because it did not produce a return receipt.

The court ruled from the bench: Because the Borrowers sufficiently pleaded failure to comply with 24 C.F.R. § 203.604, Lakeview needed to overcome the allegation. Under the facts of the case, the only applicable exception to holding a face-to-face interview was proof that Lakeview made "reasonable efforts" to schedule the meeting. Lakeview could do so by showing it visited the Borrowers at least once to attempt a face-to-face interview and by showing it sent a letter by certified mail asking to schedule the interview. The court found Lakeview failed to meet its burden. As to the first prong, Lakeview presented sufficient circumstantial evidence that a representative tried to personally meet the Borrowers. But as to the second prong, the court found the omission of a return receipt from the USPS fatal. For those reasons, the court granted the Borrowers’ motion and dismissed the complaint.

Lakeview moved for reconsideration. The court granted Lakeview's motion, limiting the scope of rehearing to 24 C.F.R. § 203.604 ’s face-to-face interview requirement. But unmoved by Lakeview's arguments on rehearing, the court entered final judgment for the Borrowers.

Analysis

The HUD enacted regulations relating to mortgage foreclosures for federally backed loans. See 24 C.F.R. §§ 203.500 - 203.608 (2019). At issue is 24 C.F.R. § 203.604, "an obscure provision contained in a federal administrative regulation." Lee v. Citimortgage, Inc. , 739 F. Supp. 2d 940, 944 (E.D. Va. 2010).

Under 24 C.F.R. § 203.604(b), a mortgagee must hold a face-to-face interview with the mortgagor or "make a reasonable effort" to hold one "before three full monthly installments due on the mortgage are unpaid." Exceptions to the face-to-face interview include instances when a mortgagor does not reside on the mortgaged property; a mortgagor suggests she will not cooperate in the interview; the mortgaged property is more than 200 miles from the mortgagee; there is an agreed repayment; or "[a] reasonable effort to arrange a meeting is unsuccessful." 24 C.F.R. § 203.604(c)(1)–(5).

The regulation clarifies the minimum actions required to comply with the "reasonable efforts" exception:

(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(d). This case turns on the interpretation of this provision.

Recently, in PennyMac Loan Services LLC v. Ustarez , No. 4D19-3547, 303 So.3d 578 (Fla. 4th DCA Sept. 16, 2020), we explained that the same "HUD regulation ... is not, in and of itself, a condition precedent to foreclosure." Id . at 580. Nevertheless, we held that compliance with the HUD regulation had been "self-impose[d]" as a contractual requirement that must be satisfied before the lender could accelerate or foreclose. Id .

We understand PennyMac ’s holding to be that the HUD regulation is not a statutory pre-condition to foreclosure applicable to all mortgage foreclosure suits. Instead, PennyMac concluded that incorporation of the HUD regulation into a note or mortgage constituted a self-imposed contractual pre-condition to foreclosure. Regardless of the precise words used in the opinion, in PennyMac this Court concluded compliance with the HUD regulation was a condition the lender had to satisfy prior to foreclosing because the language of the mortgage or note specifically required it.

In this case, because the HUD regulations were incorporated into the mortgage, Lakeview was required to substantially comply with the HUD regulation prior to accelerating the obligation or filing the foreclosure complaint. The circuit court erroneously concluded it did not do so.

The circuit court's involuntary dismissal turned on the language in the HUD regulation stating that Lakeview must make a "reasonable effort to arrange a face-to-face meeting with the mortgagor," and that the reasonable effort "shall consist at a minimum of one letter sent to the mortgagor certified by the Postal Service as having been dispatched." See 24 C.F.R. § 203.604(d).

The circuit court found that Lakeview made "a reasonable attempt" to "reach out for a face-to-face" meeting. But it concluded that Lakeview needed to introduce evidence of a return receipt "green card" from USPS. We do not interpret the regulation as limiting the manner of establishing compliance to the introduction of the USPS green card.

"Administrative rules must be interpreted according to their plain language whenever possible." Smith v. Sylvester , 82 So. 3d 1159, 1161 (Fla. 1st DCA 2012) (citation omitted). Without a statutory definition, "courts must look to [the regulation's] plain and ordinary meaning, which can be discerned from a dictionary." Gyongyosi v. Miller , 80 So. 3d 1070, 1075 (Fla. 4th DCA 2012) (citation omitted). Here, we focus on the definitions of "certify" and "dispatch."

The term "certify" is defined as "confirm[ing] formally as true, accurate or genuine," certify , The American Heritage...