U.S. Bank National Association v. Menz

          ORDER ON REPORT OF NONCOMPLIANCE

          Nancy Mills, Justice, Superior Court

          Before the court is the Foreclosure Diversion Program Mediator's Report of Noncompliance filed April 7, 2017. Hearing on the report was held on July 6, 2017. Attorney Gibbons appeared for plaintiff and Attorney Cox appeared for defendants. The attorney for the party in interest did not appear.

         Background

         Defendants' original promissory note and mortgage were dated June 4, 2004. (Compl. ¶¶ 6-7 & Exs. A & B; McLaughlin Aff. ¶ 6 & Exs. B, C.) The terms of the note and mortgage were modified in 2005 and 2014. (Compl. ¶ 9, Ex. D; McLaughlin Aff. ¶ 6 & Exs. D, E.) The 2014 loan modification was granted by PPH Mortgage Company as subservicer for plaintiff. (McLaughlin Aff. ¶ 10.) Because the 2014 modification increased defendants' monthly payments to a level they could not afford, defendants were in default by summer 2015. (Id. ¶ 21.)

          Plaintiff's complaint for foreclosure was filed on June 21, 2016. The first mediation took place on September 30, 2016.^[1] The mediator identified the documents to be provided by defendants. (FDP Document Submission Worksheet 1.) Plaintiff then demanded more documents, which delayed review of the modification application. (McLaughlin Aff. ¶¶ 25-27 & Ex. F.) Based on determinations made by the "Investor of [defendants'] loan, " plaintiff denied defendants' request for a modification by letter dated December 30, 2016. (Id. ¶ 27 & Ex. G.) Defendants filed a notice of error and appeal dated January 14, 2017. (Id. ¶ 31 & Ex. H.)

         At the second mediation on January 20, 2017, the mediator wrote, in part:

1. Review and decision on appeal by homeowner to be provided by plaintiff by Feb.21, 16.^[2]

2. Request for exception: decision in same to be provided by plaintiff by Feb. 21, 16.^[3]

Following previous mediation on September 30. 16 (1^st mediation), Homeowners request for modification of the loan was denied by letter on Dec. 30. 16 by plaintiff. Homeowner had filed an appeal and notice of error dated January 14^th 17 on the denial, which has been received by plaintiff. Plaintiff indicated at mediation today that a response with decision would be provided within 30 days on the appeal, by February 21. 17 appeal incorporated by reference. Plaintiff's underwriter on phone today agrees to request an exception for consideration of modification with an extension of the maturity date. According to underwriter, this exception would be to plaintiff's (investor guidelines) policy of not extending maturity dates. Present loan was amortized for 20 years following change from interest only loan (see prior report). Exception response shall be provided by plaintiff within 30 days by Feb. 21. 17. Parties agree to another mediation 45 days hence. Issue of document timeliness of responses to be addressed at the next mediation.

(1/20/17 Mediation Report 2-4.) According to Kimberly McLaughlin, a housing counselor, loan modification programs have similar processes to help the borrower by reducing the monthly payment while protecting the lender. (McLaughlin Aff. ¶¶ 14-18.) Plaintiff refused to consider step two of the standard process, an extension of the term of the loan. (Id. ¶ 18.) If the term of the loan had been extended to thirty years from the original term of twenty years or if the term remained at twenty years with an amortization schedule of thirty years, the result would have been an appropriate and affordable monthly payment for defendants. (McLaughlin Aff. ¶¶ 18-20, 29-30.) Instead, the modification was reviewed based only on the remaining term of the loan. (Patterson Aff. ¶ 12 & Ex. 3.) Neither defendants nor Ms. McLaughlin has received a response from PPH regarding the request to the investor to approve a term extension. (McLaughlin Aff. ¶¶ 34, 38.)

         By letter dated January 24, 2017, PPH again denied the modification on the same grounds. (Id. ¶ 35 & Ex. I.) Defendants filed a notice of error and appeal dated February 23, 2017 and requested copies of the investor restrictions on extending the term of the loan. (Id. ¶ 36 & Ex. J.) By letter dated April 3, 2017, PPH responded that the contracts PPH has with its clients are "proprietary" and cannot be provided to consumers. (Id. ¶ 37 & Ex. K.) According to Bernard Patterson, a certified fraud examiner and forensic accountant, and Ms. McLaughlin, these documents are not proprietary. (Patterson Aff. ¶¶ 10, 14-27; McLaughlin Aff. ¶ 39.)

         Based on his review of the pooling and servicing agreement for the trust involved in this case, Mr. Patterson saw no restrictions on extending the term of the loan. (Patterson Aff. ¶¶ 22-26.) In fact, loans owned by plaintiff trust have been modified to extend the maturity date. (Id. ¶¶14-21 & Ex.4.)

         At the April 7, 2017 mediation, the mediator wrote, in part:

- Homeowners' stated desire is to remain in home and to obtain an extension of the maturity date of their loan and have requested modification to ...