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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.
