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

• Decision Date: 17 February 2017
• Citation: 55 Misc.3d 1053,47 N.Y.S.3d 882
• Parties: U.S. BANK NATIONAL ASSOCIATION, as Trustee for SASCO Mortgage Loan Trust 2006–RF4, Plaintiff, v. Grady McMULLIN, Jr., a/k/a, Grady McMullin; Tiffany R. Coles; New York State Department of Taxation and Finance –Commissioner of Taxation and Finance; Albany Medical Center Hospital; United States of America–Department of the Treasury–Internal Revenue Service; "John Doe No. 1" to "John Doe # 25", said names being fictitious, the persons or parties intended being the persons, parties, corporations or entities, if any, having or claiming an interest in or lien upon the mortgaged premises described in the complaint, Defendants.
• Court: New York Supreme Court

55 Misc.3d 1053

47 N.Y.S.3d 882

U.S. BANK NATIONAL ASSOCIATION, as Trustee for SASCO Mortgage Loan Trust 2006–RF4, Plaintiff,

v.Grady McMULLIN, Jr., a/k/a, Grady McMullin; Tiffany R. Coles; New York State Department of Taxation and Finance –Commissioner of Taxation and Finance; Albany Medical Center Hospital; United States of America–Department of the Treasury–Internal Revenue Service; "John Doe No. 1" to "John Doe # 25", said names being fictitious, the persons or parties intended being the persons, parties, corporations or entities, if any, having or claiming an interest in or lien upon the mortgaged premises described in the complaint, Defendants.

Supreme Court, Albany County, New York.

Feb. 17, 2017.

Hogan Lovells U.S. LLP, (David Dunn, Stacey A. Lara and Leah Jacob, of counsel), New York, Attorneys for Plaintiff.

The Legal Project (Michelle F. Lee, of counsel), Albany, Attorneys for Grady McMullin.

RICHARD M. PLATKIN, J.

This is an action to foreclose upon a residential mortgage. Plaintiff U.S. Bank National Association, as Trustee for SASCO Mortgage Loan Trust 2006–RF4 ("SASCO Trust"), moves for an order: (1) granting summary judgment against defendant Grady McMullin ("defendant"); (2) striking defendant's answer and dismissing the affirmative defenses and counterclaims alleged therein; (3) entering a default judgment against the remaining non-appearing and non-answering defendants;¹ (4) reforming the mortgage to include the legal description of the property; (5) amending the caption to remove the "John Doe" defendants; and (6) appointing a referee to compute. Defendant opposes the motion and cross-moves for, among other things, summary judgment dismissing the complaint.

BACKGROUND

On June 24, 2003, defendant and non-appearing defendant Tiffany R. Coles executed a note in favor of Homestead Funding Corp. in the amount of $92,131, which was secured by a mortgage insured by the Federal Housing Administration ("FHA"), a division of the United States Department of Housing and Urban Development ("HUD"). Defendant and Coles defaulted on their repayment obligations and, in June 2006, entered into a loan modification agreement with Wells Fargo Home Mortgage, Inc. ("Wells Fargo"). The borrowers defaulted again by failing to make the payments due and owing on and after March 1, 2009. Plaintiff commenced this action in May 2012 to foreclose on the mortgage.

Defendant answered and alleged forty² affirmative defenses and eleven counterclaims, including allegations of breach of contract, violations of various HUD regulations, and lack of standing. Settlement conferences were held before the Court on January 17, 2013, February 28, 2013, April 25, 2013 and June 6, 2013, with defendant represented by counsel at each such appearance. At the June 6, 2013 conference, the Court was advised that defendant was ineligible for a loan modification under the FHA Home Affordable Modification Program ("HAMP") and that non-HAMP options were unaffordable to defendant. At that point, both sides agreed that this case should be released from the settlement conference part, and the instant motion practice ensued.³

ANALYSIS

A plaintiff in a mortgage foreclosure action establishes its prima facie entitlement to judgment as a matter of law by producing the mortgage, proof of the unpaid debt and evidence of the default (see Loancare v. Firshing, 130 A.D.3d 787, 14 N.Y.S.3d 410 [2d Dept.2015] ; Wells Fargo Bank, N.A. v. Erobobo, 127 A.D.3d 1176, 9 N.Y.S.3d 312 [2d Dept.2015], lv. dismissed 25 N.Y.3d 1221, 16 N.Y.S.3d 514, 37 N.E.3d 1158 [2015], appeal dismissed 26 N.Y.3d 1006, 20 N.Y.S.3d 546, 42 N.E.3d 216 [2015] ). Upon such a showing, the burden shifts to the defendant " ‘to demonstrate the existence of a triable issue of fact as to a bona fide defense to the action’ " (Cochran Inv. Co., Inc. v. Jackson, 38 A.D.3d 704, 705, 834 N.Y.S.2d 198 [2d Dept.2007], quoting Mahopac Natl. Bank v. Baisley, 244 A.D.2d 466, 467, 664 N.Y.S.2d 345 [2d Dept.1997], lv. dismissed 91 N.Y.2d 1003, 676 N.Y.S.2d 129, 698 N.E.2d 958 [1998] ).

In support of its motion, plaintiff submits, among other things, the note, mortgage, proof of assignments, the notices provided to defendant, and the relevant trust agreement. Plaintiff also submits the affidavit of Alissa Doepp, a vice president for loan documentation at Wells Fargo Bank, N.A., successor by merger of Wells Fargo, which establishes that the loan is in default. Doepp further avers that plaintiff has maintained physical possession of the note since April 2012, thereby establishing a basis for its standing to maintain this action separate and apart from plaintiff's status as an assignee.

The foregoing submissions establish plaintiff's prima facie entitlement to summary judgment, and the burden therefore shifts to defendant to raise a triable issue of fact with respect to his affirmative defenses and/or counterclaims. In opposition to the motion, defendant submits argument and evidence with respect to three issues: (1) plaintiff's standing to maintain this action; (2) plaintiff's alleged commencement of this action in breach of the mortgage and note and the covenant of good faith and fair dealing implicit therein; and (3) the equitable defense of unclean hands.⁴

Defendant first argues that plaintiff lacks standing to commence this action because the note and mortgage were transferred into the SASCO Trust in violation of the pooling service agreement and/or Estates, Powers and Trust Law § 7–2.4. This argument is without merit because defendant, "as a mortgagor whose loan [was] owned by a trust, does not have standing to challenge the plaintiff's possession or status as assignee of the note and mortgage based on purported noncompliance with certain provisions of the [service agreement]" (Wells Fargo Bank, N.A., 127 A.D.3d at 1178, 9 N.Y.S.3d 312 ; see Bank of N.Y. Mellon v. Gales, 116 A.D.3d 723, 725, 982 N.Y.S.2d 911 [2d Dept.2014] ; see also Rajamin v. Deutsche Bank Natl. Trust Co., 757 F.3d 79, 86–88 [2d Cir.2014] ). Defendant's unsupported speculation that the existence of a prior, discontinued foreclosure action against him suggests the existence of irregularities in the chain of title to his loan likewise fails to raise a triable issue of fact. Accordingly, defendant's affirmative defense alleging that plaintiff lacks standing to maintain this action must be rejected.⁵

Defendant next contends that plaintiff commenced this action under circumstances not permitted by the HUD mortgage servicing regulations (24 C.F.R. Part 203 ["Part 203"] ), which is said to constitute a breach of the note and mortgage, as well as a failure on plaintiff's part to comply with a condition precedent to suit. Relatedly, defendant complains that plaintiff failed to properly consider his application for a loan modification under the HAMP regulations, thereby violating the covenant of good faith and fair dealing inherent in the loan documents.

With respect to Part 203, the mortgage provides as follows: "In many circumstances, regulations issued by [HUD] will limit [plaintiff's] rights, in the case of payment defaults, to require immediate payment in full and foreclosure if not paid. This [mortgage] does not authorize acceleration or foreclosure if not permitted by regulations of [HUD]" (§ 9[d] ).⁶

The federal regulations at issue herein "identif[y] servicing practices of lending institutions that HUD considers acceptable for mortgages insured by HUD" (24 C.F.R. 203.500 ). The regulations also establish certain "pre-foreclosure" obligations on the part of a mortgagee:

Before initiating foreclosure, the mortgagee must ensure that all servicing requirements of [Part 203] have been met. The mortgagee may not commence foreclosure ... unless at least three full monthly installments due under the mortgage are unpaid after application of any partial payments that may have been accepted but not yet applied to the mortgage account. In addition, prior to initiating any action required by law to foreclose the mortgage, the mortgagee shall notify the mortgagor in a format prescribed by the [HUD] Secretary that the mortgagor is in default and the mortgagee intends to foreclose.... (24 CFR 203.606 [a] ).

Among the pre-foreclosure obligations established by Part 203 is a face-to-face meeting: "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" (24 C.F.R. 203.604 [b]; see 24 C.F.R. 203.606 [a] ). Under the regulations,

[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] ).

According to defendant, plaintiff failed to "have a face-to-face interview with [him], or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage [were] unpaid", in violation of the regulations cited above. Plaintiff responds that its efforts over a multi-year period to negotiate a resolution of the issues raised by defendant's default more than satisfied its regulatory and contractual obligations. Plaintiff further maintains that it gave adequate and appropriate consideration to each of defendant's multiple requests for a loan modification.

The Court concludes that the proof adduced by plaintiff in support of the motion demonstrates that it made good-faith, reasonable efforts over a multi-year period to negotiate a consensual resolution of defendant's longstanding default before commencing this...