Tuesday, August 29, 2017

foreclosure - mitigation - Regulation X - lack of specification of documents homeowner failed to supply

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Bank of New York Mellon v. Brooks, Jr. – Superior Court – August 28, 2017



Homeowner raised sufficient questions about mortgage servicer’s compliance with loss-mitigation requirements of “Mortgage Servicing Rules under the Real Estate Settlement Procedures Act (Regulation X),”  codified at 12 C.F.R. § 1024.30 et seq., as to preclude summary judgment for servicer.    

The servicer rejected  homeowner’s application  “because the required documentation needed to proceed was not received.”   The servicer failed, however, to identify which documents homeowner neglected to provide.  Trial court reversed and case remanded.
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 “Mortgage Servicing Rules under the Real Estate Settlement Procedures Act (Regulation X),” are codified at 12 C.F.R. § 1024.30 et seq. “Regulation X prohibits, among other things, a loan servicer from foreclosing on a property in certain circumstances if the borrower has submitted a completed loan modification, or loss mitigation, application.” Miller v. Bank of New York Mellon, 228 F.Supp.3d 1287, 1290 (M.D.Fl. 2017)

 Regulation X requires servicers2 to follow specified loss mitigation procedures for a mortgage loan secured by a borrower’s principal residence. A “loss mitigation application” is “an oral or written request for a loss mitigation option that is accompanied by any information required by a servicer for a loss mitigation option.” 12 C.F.R. § 1024.31. A “loss mitigation option means an alternative to foreclosure offered by the owner or assignee of a mortgage loan that is made available through the servicer to the borrower.” Id.

 If a borrower submits an application for a loss mitigation option more than forty-five days prior to a foreclosure sale, the servicer is generally required to acknowledge the receipt of the application in writing within five days and notify the borrower whether the application is complete and, if not, inform the borrower of the additional documents and information needed to complete the application. See id. at § 1024.41(b)(1), (b)(2)(i) and (ii). The notice shall also state a reasonable date by which the borrower should submit the documents and information. Id. at § 1024.41(b)(2)(ii).  The servicer must exercise reasonable diligence in obtaining documents and information to complete the application. Id. at § 1024.41(b)(i).

 If a borrower submits all the missing documents and information as stated in the notice, or if no additional information is requested, the application shall be considered facially complete for purposes of subsections 1024.41(d), (e), (f)(2), (g) and (h). See id. at § 1024.41(c)(2)(iv).  If the servicer later discovers additional information or corrections are required to complete the application, the servicer must promptly request the missing information or corrected documents and treat the application as complete until the borrower has a reasonable opportunity to complete the application. Id.

 For a complete loss mitigation application received more than thirtyseven days before a foreclosure sale, the servicer is required to evaluate the borrower, within thirty days of receiving the complete application, for all loss mitigation options for which the borrower may be eligible in accordance with the investor’s eligibility rules. Id. at § 1024.41(c)(1)(i). The servicer must provide the borrower with a written decision, including an explanation of the reasons for denying the borrower for any loan modification option offered by an owner or assignee of a mortgage loan. Id. at § 1024.41(c)(1)(ii).

 If a borrower submits a complete application for a loss mitigation option after the foreclosure process has commenced but more than thirtyseven days before a foreclosure sale, a servicer may not move for a J-S84034-16 - 8 - foreclosure judgment or order of sale or conduct a foreclosure sale, until one of the following three conditions has been satisfied: (1) the servicer has sent the borrower a notice that the borrower is not eligible for any loss mitigation option, and the appeal process in paragraph (h) of this section is not applicable, the borrower has not requested an appeal within the applicable time period for requesting an appeal, or the borrower’s appeal has been denied; (2) the borrower rejects all loss mitigation options offered by the servicer; or (3) the borrower fails to perform under an agreement on a loss mitigation option. Id. at § 1024.41(g)(1)-(3).


 Here, construed in the light most favorable to Appellant, the party opposing summary judgment, a genuine issue of material fact exists as to whether Appellee violated Regulation X, thus precluding foreclosure on Appellant’s property.     The servicer rejected Appellant’s Application “because the required documentation needed to proceed was not received.”   The servicer failed, however, to identify which documents Appellant neglected to provide.

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