Ocwen Loan Servicing, LLC v. Eckley
| Decision Date | 11 May 2021 |
| Docket Number | Appeal No. 2019AP1705 |
| Citation | 2021 WI App 41,962 N.W.2d 263 (Table) |
| Court | Wisconsin Court of Appeals |
| Parties | OCWEN LOAN SERVICING, LLC, Plaintiff-Respondent, v. Steven J. ECKLEY and Shannon R. Eckley, Defendants-Appellants. |
¶1 Steven and Shannon Eckley appeal a judgment of foreclosure. They argue Ocwen, the loan servicer, improperly accelerated their loan. They also argue Ocwen failed to prove a prima facie case for summary judgment establishing the entire amount of the foreclosure judgment. We reject the Eckleys’ arguments, except we agree that the judgment improperly included $19,240.72 in prior servicer fees, the basis for which is unclear. We reverse that portion of the judgment and remand for further proceedings consistent with this opinion, but we affirm the judgment in all other respects.
¶2 Ocwen is a loan servicer and current holder of a note executed by the Eckleys in 2010 in the amount of $325,734. The Eckleys also executed a mortgage securing their repayment obligation with real property located in Rhinelander. In 2017, Ocwen filed the present foreclosure action, alleging the Eckleys had defaulted on the note by failing to make any payment after May 1, 2013. Ocwen requested a judgment of foreclosure for "principal, interest, late charges, taxes, insurance, costs, disbursements and attorney fees [in an amount to] be adjudged and determined."
¶3 The Eckleys answered, asserting among other things that Ocwen could not accelerate amounts due under the note because there had been no face-to-face meeting or an attempt to arrange one between the Eckleys and the lender. The Eckleys later added counterclaims alleging that, for a variety of reasons, Ocwen had used inaccurate or incomplete information to service loans generally, although the counterclaims identified no concrete theories of liability nor allegations specific to the Eckleys’ loan. The counterclaims were ultimately dismissed, and the circuit court granted Ocwen's motion for summary judgment. The court entered a judgment of foreclosure in the total amount of $423,646.39, with no deficiency judgment. The Eckleys now appeal. Additional facts will be set forth in the discussion section as necessary.
¶4 The Eckleys identify what their reply brief asserts are the "two key issues." First, the Eckleys argue that the note and mortgage were improperly accelerated because Ocwen failed to comply with all of the Department of Veterans Affairs (V.A.) regulations necessary to accelerate the loan. Second, they argue Ocwen failed to make a prima facie case for summary judgment, in that it failed to establish by admissible evidence the entire amount of the $423,646.39 debt. The Eckleys state there are no issues regarding "who owns the Note, the validity of the mortgage and admission of missed payments."
¶5 Section 7(B) of the note, under the heading "Default," states:
If Borrower defaults by failing to pay in full any monthly payment, then Lender may, except as limited by regulations of the Department of Veterans Affairs in the case of payment defaults, require immediate payment in full of the principal balance remaining due and all accrued interest. Lender may choose not to exercise this option without waiving its rights in the event of any subsequent default. This Note does not authorize acceleration when not permitted by V.A. regulations.
The Eckleys argue this provision incorporates the entirety of 38 C.F.R. § 36.4350 (2020),1 into the loan agreement.2 That regulation sets forth servicing procedures for holders of loans guaranteed or insured by the V.A.
¶6 This aspect of the Eckleys’ argument is undeveloped. The Eckleys assume, without citation to legal authority, that a loan servicer is required to demonstrate compliance with each and every applicable regulation as a condition precedent to commencing and maintaining a foreclosure action.3 They have cited no Wisconsin authorities on this point, though, and nationally, authorities appear divided on whether to treat compliance with some or all servicing regulations designed to avoid default as a condition precedent to foreclosure (which the servicer must prove) or an affirmative defense (which the mortgagor must prove). Compare Chrzuszcz v. Wells Fargo Bank, N.A. , 250 So. 3d 766, 768 (Fla. Dist. Ct. App. 2018) (), with Federal Nat'l Mortg. Ass'n v. Moore , 609 F. Supp. 194, 196 (N.D. Ill. 1985) (). Because the Eckleys fail to cite applicable legal authority in support of their argument—and, relatedly, because their assertion that compliance with all applicable servicing regulations must be treated as a condition precedent to foreclosure for purposes of Wisconsin law is conclusory and undeveloped—we decline to address this argument. See State v. Pettit , 171 Wis. 2d 627, 646, 492 N.W.2d 633 (Ct. App. 1992).4
¶7 In any event, we note that the vast majority of regulations to which the Eckleys cite are in the nature of general directives toward loan holders and do not directly establish those holders’ duties toward distressed mortgagors or explicitly provide a defense in a foreclosure action. For example, 38 C.F.R. § 36.4350(a) imposes an obligation upon those who hold V.A. loans to "develop and maintain a loan servicing program which follows accepted industry standards for servicing of similar type conventional loans." Subsection (b), in the portion cited by the Eckleys, provides that loan holders must "establish procedures to provide loan information to borrowers" and "arrange for individual loan consultations upon request." Paragraph (g)(2) sets forth a similarly general duty to explain to the V.A. secretary any failures to perform the collection actions specified under (g)(1), including face-to-face meetings with borrowers under appropriate circumstances. Subsection (d) describes the notice requirements for when a V.A. loan is transferred from one holder to another, and subsection (f) describes a number of required components for a loan holder's system of servicing delinquent loans.
¶8 Even assuming one could consider compliance with these general servicing obligations as conditions precedent to foreclosure, the Eckleys err by relying on the testimony of Ocwen senior loan analyst Benjamin Verdooren as proof of any lack of compliance. As the Eckleys readily acknowledge, when asked specifically about the language of the regulations during his deposition, Verdooren variously stated that he was either unfamiliar with the regulations or lacked personal knowledge of whether Ocwen's procedures generally complied with their dictates. The Eckleys overread much of Verdooren's testimony in asserting that it establishes Ocwen's noncompliance.
¶9 That aside, Ocwen posits that the summary judgment record is lacking on this point not because Verdooren was a poor witness, but because Ocwen lacked notice that the Eckleys intended to raise any issue regarding the V.A. regulations except noncompliance with the face-to-face meeting requirement.5 Ocwen asserts that the Eckleys never filed a notice of corporate deposition under WIS. STAT. § 804.05(2)(e) (2019-20),6 requesting that it provide a corporate designee to answer questions regarding compliance efforts with all V.A. regulations. According to Ocwen, Verdooren was made available for deposition to answer questions regarding his affidavit made in support of Ocwen's summary judgment motion. The Eckleys noticeably fail to respond to any of these procedural assertions. In short, the Eckleys have not created a record in opposition to Ocwen's motion for summary judgment that sufficiently creates a genuine issue of material fact regarding compliance with the servicing regulations the Eckleys cite.
¶10 As for the Eckleys’ assertions regarding the lack of a face-to-face meeting, the summary judgment record undisputedly shows Ocwen was not deficient in this regard. Under 38 C.F.R. § 36.4350(g)(1), loan holders must "employ collection techniques which provide flexibility to adapt to the individual needs and circumstances of each borrower," including several mandatory procedures. Subsection (g)(1)(iii) mandates that a face-to-face meeting (or reasonable efforts to arrange one) is required only "[i]n the event the holder has not established contact with the borrower(s) and has not determined the financial circumstances of the borrower(s) or established a reason for the default or obtained agreement to a repayment plan from the borrower(s)."
¶11 Here, the summary judgment record undisputedly establishes contact and a determination of the Eckleys’ financial circumstances. Ocwen repeatedly sent default notices to the Eckleys in the months after their last payment. In September 2013, the Eckleys responded to Ocwen with a completed financial analysis form, which included affidavits identifying the hardship resulting in the failure to make payments as "unemployment" and a "reduction in income." In addition to providing general information on the form, the Eckleys described their income, expenses and assets. Following their request for loan modification, the Eckleys were assigned an Ocwen "relationship manager," with whom the Eckleys corresponded and provided further information about their finances. In their affidavits, the Eckleys did not deny that they had "contact" with Ocwen. Rather, they complained that Ocwen had not arranged a face-to-face meeting with them.
¶12 Additionally, the Eckleys complained that Ocwen's ascertainment of their financial circumstances was incomplete because Ocwen was unaware those circumstances "included a father-in-law who could pay down the loan." Indeed, the Eckleys filed an affidavit from ...
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