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The Bank of New York Mellon v. Brooks

Superior Court of Pennsylvania

August 28, 2017

THE BANK OF NEW YORK MELLON F/K/A THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF CWALT, INC., ALTERNATIVE LOAN TRUST 2007-HY6 MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2007-HY6
v.
RICHARD H. BROOKS, JR., Appellant

         Appeal from the Order Entered April 1, 2016 in the Court of Common Pleas of Northampton County Civil Division at No(s): C-48-CV-2012-2395

          BEFORE: OLSON, SOLANO, and FITZGERALD, [*] JJ.

          OPINION

          FITZGERALD, J.

         Appellant, Richard H. Brooks, Jr., appeals from the order granting summary judgment in favor of Appellee, The Bank of New York Mellon, in this mortgage foreclosure action. Appellant argues that Appellee's servicer failed to respond properly to Appellant's loss mitigation application in violation of 12 C.F.R. § 1024.41(g) ("Regulation X"). We reverse the trial court's order and remand for further proceedings.

         The record provides the following. In March 2007, Appellant obtained a loan from Countrywide Home Loans, Inc. secured by a mortgage in favor of Mortgage Electronic Registration Systems, Inc., as Countrywide's nominee, upon Appellant's residence in Easton, Pennsylvania. In September 2011, Countrywide assigned the mortgage to Appellee. In late 2010, Appellant defaulted upon his mortgage payments.

         In March 2012, Appellee instituted the present foreclosure action. On May 13, 2015, while the action remained pending, Appellant, through his counsel, submitted an application for loss mitigation ("Application") to Select Portfolio Servicing, Inc. ("SPS"), the servicer of the loan for Appellee. The Application requested a "short payoff" of the mortgage, which Appellant defined as a "lump sum payoff of the mortgage for less than the outstanding balance of the mortgage." Memorandum In Support Of Appellant's Response To Mot. For Summ. J., at 2. The Application contained multiple documents and additional information relating to Appellant's financial status. Appellant's Response To Mot. For Summ. J., Ex. A.

         In an email to SPS on June 24, 2015, Appellant's counsel stated that he had not received a response to the Application and inquired about its status. By email to SPS on July 15, 2015, counsel again stated that he had received no response. On August 4, 2015, still having received no response, counsel telephoned SPS. During the conversation, SPS requested additional documentation to evaluate the Application. On August 12, 2015, counsel forwarded four additional documents by email to SPS relating to Appellant's financial status. Id., Ex. D. Counsel received no further request from SPS for information or documentation.

         In a letter dated August 26, 2015, SPS stated: "We determined that we are unable to assist you in this proposed arrangement because the required documentation needed to proceed was not received." Id., Ex. E. On September 2, 2015, counsel responded to SPS as follows: "By email to you on August 12, 2015, I forwarded all additional documents requested by SPS in support of my client's request for a short payoff. I am unaware of any further documentation needed from the borrower to process his request. Please advise immediately." Id., Ex. F. SPS never responded to the email or identified what documentation was missing.

         In January 2016, Appellee moved for summary judgment. Appellant responded that Appellee failed to comply with loss mitigation procedures under Regulation X.

         On April 1, 2016, the trial court entered summary judgment in favor of Appellee. On April 28, 2016, Appellant timely appealed to this Court.[1]

         Appellant raises three issues in this appeal:

A. Whether [Appellant] asserted sufficient facts and provided adequate documentation to establish that he submitted a complete loss mitigation application, that [Appellee]'s servicer failed to respond properly, and that [Appellee] was acting in violation of [Regulation X] by moving for summary judgment?
B. Whether [Appellant] was required to utilize the process under Regulation X for appealing a denial of a loss mitigation application when the servicer never sent [Appellant] a notice, as required by 12 C.F.[R.] § 1024.41(c)(1)(ii), stating the servicer's determination of which loss mitigation options, if any, it will offer, and notifying [Appellant] of his right to appeal, the amount of time to appeal, and any requirements for making an appeal?
C. Whether [Appellant] was required to utilize the error resolution procedures of Regulation X prior to raising the servicer's noncompliance with Regulation X in opposition to [Appellee] moving for foreclosure judgment?

Appellant's Brief at 2.

         Our standard of review in an appeal from an order granting summary judgment is well settled:

[o]ur review of the trial court's grant of summary judgment is plenary. Summary judgment is proper where the pleadings, depositions, answers to interrogatories, admissions and affidavits and other materials show there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. We must view the record in the light most favorable to the opposing party and resolve all doubts as to the existence of a genuine issue of material fact in favor of the nonmoving party. We will reverse the trial court's grant of summary judgment only upon an abuse of discretion or error of law.

412 North Front Street Assocs., LP v. Spector Gadon & Rosen, P.C., 151 A.3d 646, 660 (Pa. Super. 2016) (citation omitted).

         In his first argument, Appellant contends that he submitted a complete loss mitigation application, that Appellee's servicer failed to respond properly, and that Appellee violated Regulation X by seeking summary judgment. We agree with Appellant that Appellee is not entitled to summary judgment on this record.

         Effective January 10, 2014, pursuant to the federal Dodd-Frank Act, the Consumer Financial Protection Bureau ("CFPB") adopted new regulations relating to mortgage servicing. See Pub. L. No. 111-203, 124 Stat. 1376 (sections 1461-1465) (July 21, 2010). The new regulations, entitled "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) (citation omitted).

         Regulation X requires servicers[2] 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. ยง 1024.31. A "loss mitigation option means an alternative to foreclosure offered by the owner ...


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