Appellate Court Rules for Mortgagee on Face-to-Face Meeting Exception Case

In the recent McBenttes case, Ohio’s Ninth District Court of Appeals agreed with a trial court that the mortgagee was not required to hold the pre-foreclosure face-to-face meeting under federal regulations.  

The Department of Housing and Urban Development (HUD) ‎regulations require lenders to “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” and “at least 30 days before foreclosure is commenced.” ‎There are exceptions to this requirement, ‎including when “[t]he mortgaged property is not within 200 miles of the mortgagee, its servicer, ‎or a branch office of either.”  

The difficulty is often determining what is a “branch office.” Conflicting court decisions across the country about that can make relying on the 200-mile exception tenuous.

‍Branch Office Requirements

In the McBenttes case, the borrower opposed summary judgment, arguing that the mortgagee did not comply with the face-to-face meeting requirement before initiating the foreclosure action. The mortgagee argued, in part, that it was not required to comply because it did not have a branch office within 200 miles of the property. The borrower argued that the mortgagee’s website contained a contact address that was within 200 miles of the property, so the exception was not met.  

In support of its summary judgment burden, the mortgagee provided evidence that the address was for mailing insurance claims and not related to mortgage-related servicing operations. The mortgagee did not own the building, and did not rent, own, or buy office equipment there. Further, the mortgagee did not have, or pay wages to, any employees in the building. The Court of Appeals found that the mortgagee had satisfied its initial summary judgment burden.  

The appellate court also found that the borrower’s evidence in opposition contained inadmissible hearsay, and thus failed to produce any summary judgment evidence to rebut what the mortgagee produced. It ruled that summary judgment in favor of the mortgagee was proper. ‍

Pre-Foreclosure Best Practices

‍Lenders and servicers with FHA loans should be cautious when relying on the 200-mile exception to the face-to-face requirement because there remains no bright-line rule as to what constitutes a branch office in Ohio. Best practice is to conduct a thorough pre-foreclosure assessment to ensure that HUD servicing regulations are satisfied. When proceeding on an exception, servicers should work with counsel to provide detailed evidentiary rebuttal to any claims that the exception does not apply.