Fla. App. Court (2nd DCA) Indicates FHA ‘Face-to-Face’ Requirement Applies to ‘Mortgagee and Loan Servicer’

The District Court of Appeal of the State of Florida, Second District, recently reversed a summary judgment award in favor of the borrowers in a foreclosure action, finding a triable issue of material fact existed concerning whether the face-to-face counseling requirements of 24 C.F.R. § 203.604 applied, as the mortgagee did not submit evidence “as to whether the mortgagee and loan servicer had a branch office within 200 miles of the property during the time period before three full monthly installments due on the mortgage went unpaid.”

A copy of the opinion in ARC HUD I, LLC v. Ebbert is available at:  Link to Opinion.

A mortgagee filed a foreclosure complaint against the borrowers.  During the foreclosure action, the mortgagee assigned the note and mortgage to a different mortgagee.  The new mortgagee then substituted into the foreclosure action as the party plaintiff.

The borrowers moved for summary judgment arguing that “Plaintiff failed to comply with the face-to-face counseling requirements of 24 C.F.R. § 203.604.”

As you may recall, 24 C.F.R. § 203.604 requires that “[t]he 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.”  However, a face-to-face meeting is not required if “the mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either.”  Id.

In support of their motion, the borrowers submitted an affidavit stating: “I never participated in any face-to-face counseling with Plaintiff,” and that they “reside in the property and Plaintiff has a branch within 200 miles of the property (and has had such a branch since the time of the alleged default).”  In response, the mortgagee submitted its own affidavit stating that the mortgagee and the prior mortgagee “do not have servicing centers or branch offices located within 200 miles of the subject property.”

The trial court granted the borrowers’ motion for summary judgment and found that the mortgagee’s affidavit addressed only the location of its branch offices and servicing centers at the time of summary judgment.  The trial court held that the mortgagee failed to show whether the prior mortgagee had a branch office or a servicing center within 200 miles of the subject property at the time of default.

The trial court then denied the mortgagee’s motion for rehearing.  In support of its motion, the mortgagee provided an amended affidavit stating that it, the prior mortgagee and the original lender each did not have “servicing centers or branch offices within 200 miles of the subject property three months prior to the alleged default of June 1, 2011.”

The Appellate Court reversed the trial court’s ruling, and held that “the amended affidavit in opposition to summary judgment filed with the motion for rehearing created a genuine issue of material fact as to whether the mortgagee and loan servicer had a branch office within 200 miles of the property during the time period before three full monthly installments due on the mortgage went unpaid.”

The Appellate Court also found that the mortgagee was not precluded from filing an amended affidavit in connection with its motion for rehearing.  The Appellate Court relied on Fatherly v. Cal. Fed. Bank, 703 So. 2d 1101, 1102 (Fla. 2d DCA 1997) and noted that “under Florida Rule of Civil Procedure 1.530 a judge has broad discretion to grant a rehearing of a summary judgment when the party seeking rehearing submits matters that would have created an issue precluding summary judgment if they had been raised prior to the hearing on the motion.”

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Patrick R. Tira is based in Maurice Wutscher's San Diego office, where he practices in the firm's Commercial Litigation, Consumer Credit Litigation, Business Formation and Transactions, Intellectual Property Litigation, and Employment Litigation groups. He has extensive litigation experience in matters involving a wide variety of complex real estate and business disputes, ranging from post-foreclosure evictions and real estate fraud to misappropriation of trade secrets claims and shareholder disputes. He is experienced in all stages of litigation and has recovered millions for his clients in judgments and arbitration awards. In addition to his success in the courtroom, Patrick advises internet and other technology companies, real estate investors, medical professionals, and other businesses on an array of transactional matters. For example, he has extensive experience counseling clients on entity formation, licensing and service-level agreements, real estate agreements, internal policies and procedures, and related matters. Patrick employs his litigation experience to appropriately structure internal policies and procedures, licensing and service-level agreements, ownership and other agreements, and also to anticipate where disputes may arise in the future. He strives to enable his clients to achieve their goals and to avoid potential litigation.