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The Presidentially-declared COVID-19 National Emergency Ended. Here's what it means for Agency-specific Loss Mitigation.
The United States Senate passed a resolution to end the National Emergency for COVID-19 on March 29, 2023, and the President signed it on Monday, April 10, ending the emergency earlier than May 11, 2023 as previously announced. Now that the National Emergency has ended, it is important to understand the implications for servicing, default, and loss mitigation. Below outlines the significance behind the ending of the National Emergency. This post includes Agency-specific updates covering:
Additional Loss Mitigation Resources
USPS MAILING RECEIPT IS NOT REQUIRED AND WITNESS TESTIMONY IS SUFFICIENT TO PROVE COMPLIANCE
In Lakeview Loan Servicing, LLC v. Walcott-Barr, Case No. 4D19-1582, the trial court granted the borrowers motion for involuntary dismissal because Lakeview failed to introduce evidence of mailing of the HUD face-to-face letter from the United States Postal Service. On October 14, 2020, the Fourth DCA issued an opinion overturning the trial court’s dismissal and reversed the judgment.
At trial, Lakeview’s witness stated that they visited the property once in an attempt to conduct a face-to-face interview, and the HUD face-to-face letter was: addressed to the Borrowers, sent to the property address, and sent by USPS certified mail. As additional confirmation that the letter was sent by certified mail, the witness identified the USPS certified mail tracking number. However, Lakeview did not introduce any mailing receipt or letter log into evidence. The borrowers argued they were entitled to an involuntary dismissal because there was not a face-to-face interview, and Lakeview had not shown it made reasonable efforts to schedule an interview by a certified letter because it did not produce a mailing return receipt. The trial court concluded that Lakeview needed to introduce evidence of a mailing return receipt from USPS and the case was dismissed.
However, the Fourth DCA held that the plain language of the applicable HUD regulation (see 24 C.F.R. § 203.604(d)) does not require a certified mail receipt from the USPS to establish compliance. Rather, the servicer can introduce other evidence to confirm compliance with the regulation. But, most importantly, the regulation does not limit how a lender can prove such compliance.
Accordingly, the Fourth DCA held that Lakeview established compliance through witness testimony. The witness identified the letter sent to the borrowers requesting a face-to-face meeting. The witness explained that the letter, admitted as an exhibit without objection, was sent to the borrowers at the property address and was sent via USPS certified mail. The witness also identified the USPS certified mail tracking number. Moreover, the letter was sent by a third party vendor, and the witness sufficiently detailed her training of the mailing policies and procedures of her employer and the vendor. Pursuant to the Fourth DCA, this testimony was sufficient to establish a “reasonable effort” under 24 C.F.R. § 203.604(d).
Important to note: In this case, because the HUD regulations were incorporated into the mortgage, the Fourth DCA stated that Lakeview was required to substantially comply with the HUD regulation prior to accelerating the obligation or filing the foreclosure complaint. This issue was recently addressed in PennyMac Loan Services LLC v. Ustarez, No. 4D19-3547, 2020 WL 5541982 (Fla. 4th DCA 2020), which states that the HUD regulation is not a statutory pre-condition to foreclosure applicable to all mortgage foreclosure suits. Instead, PennyMac concluded that incorporation of the HUD regulation into a note or mortgage constituted a self-imposed contractual pre-condition to foreclosure. In other words, compliance with the regulation is only an issue if the note and mortgage contain language requiring compliance. In Lakeview, the loan documents did incorporate the HUD regulation, therefore, the servicer was required to introduce evidence that it complied with the regulations.
On Thursday, August 27, 2020, FHA and FHFA Released the highly anticipated extensions extending the Foreclosure and Eviction Moratoriums until December 31, 2020.
VA released their updated Foreclosure and Eviction Circulars yesterday (Circular 26-20-29 and Circular 26-20-30) extending the foreclosure and eviction moratorium until December 31, 2020. On Friday, August 28, 2020, USDA released additional guidance and extended its moratorium through December 31, 2020, as well. Read USDA's release here.
Need more on FHA updates and developments?
Register for PANDIFFERENT, the PLG web summit, on October 1 and hear directly from Marissa Yaker, Esq. as she leads a session on FHA updates, handbook revisions, and the impact of COVID-19 holds and moratoriums on foreclosures and evictions as we look at post-pandemic default servicing.
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