Appellate E-lert: Florida Fourth District Court of Appeal Holds that Certified Mail Receipt Not Required to Foreclose HUD Insured Loan

By: Jonathan L. Blackmore, Of Counsel

The Florida Fourth District Court of Appeal ruled on Wednesday in Lakeview Loan Servicing, LLC v. Santia Lashawn Walcott-Barr, that a foreclosing lender is not required to introduce a certified mail return receipt from the United States Postal Service in order to prove compliance with HUD Regulation 24 C.F.R. Sec. 203.604(d). In Lakeview, the borrower asserted as a defense that Lakeview did not comply with 24 C.F.R. Sec. 203.604(b), which requires that a mortgagee of a HUD insured loan hold a face-to-face interview with the mortgagor or “make a reasonable effort” to hold one “before three full monthly installments due on the mortgage are unpaid.” A “reasonable effort” is defined under 203.604(d) as consisting of at a minimum “one letter sent to the mortgagor certified by the Postal Service as having been dispatched” and at least “one trip to see the mortgagor at the mortgaged property, unless the mortgaged property is more than 200 miles from the mortgagee, its servicer, or a branch office of either, or it is known that the mortgagor is not residing in the mortgaged property.”  

At trial, Lakeview admitted into evidence a letter addressed to the borrowers requesting a face-to-face meeting, which Lakeview’s witness testified was mailed to the borrowers at the property by USPS certified mail. As additional confirmation that the letter was sent by certified mail, the witness identified the USPS certified mail tracking number. At the close of trial, the borrowers argued that Lakeview had not shown it made reasonable efforts to schedule an interview by a certified letter because it did not produce a return receipt. The Court found that circumstantial evidence supported the finding that Lakeview made a trip to the property to arrange a face-to-face interview, but agreed with the borrowers that Lakeview’s failure to enter into evidence a USPS return receipt was fatal.

The Fourth District reversed the trial court’s ruling, holding that the plain language of 24 CFR 203.604(d) does not limit the manner of establishing compliance to the introduction of a USPS return receipt. First, the Court cited to its recent holding in Pennymac Loan Services LLC v. Ustarez, in finding that compliance with HUD regulations is only a condition precedent to foreclosure where the language of the mortgage or note required it.  Because the HUD regulations were incorporated into the mortgage, Lakeview was required to substantially comply with the HUD regulations prior to accelerating the obligation or filing the foreclosure complaint. Next, the Court analyzed the specific language of the regulation and determined that “to certify a letter has been dispatched generally means to confirm or attest to the prompt or speedy sending off of something”. In analyzing opinions from other states, the Court ruled the regulation requires the “authentication or verification” of a “prompt sending off” of the certified letter, but does not limit how a lender can prove such compliance. In conclusion, the Court found that Lakeview established compliance with the regulation through the testimony of its witness, who identified the letter sent to the borrowers requesting a face-to-face meeting and also identified the USPS certified mail tracking number. 

Servicers of HUD insured loans should ensure that their witnesses are prepared to provide testimony establishing the mailing of the face-to-face meeting request letter by both testimony and additional evidence such as a mailing log. For additional questions on HUD compliance issues, please feel free to reach out to me directly at (786) 491-1108 or jonathan.blackmore@gray-robinson.com.