When Is Face-To-Face Not Face-To-Face Enough? Wells Fargo Bank, N.A. vs. Cook and 24 C.F.R. 203.604(b)

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When Is Face-To-Face Not Face-To-Face Enough?  Wells Fargo Bank, N.A. vs. Cook and 24 C.F.R. 203.604(b)According to 24 C.F.R. 203.604(b), a “mortgagee must 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.” In Wells Fargo Bank, N.A. vs. Cook, a Massachusetts appeals court held that there were material disputed facts regarding whether a meeting for defaulting mortgagors that Wells Fargo held at Gillette Stadium satisfied the substantive face-to-face requirements of 24 C.F.R. 203.604(b).

In Cook, the mortgagors failed to make their monthly payments for three months, June through August of 2008. Their mortgage was insured by the Federal Housing Administration (FHA), and HUD regulations were expressly incorporated into the mortgage, limiting the mortgagee’s right to accelerate the loan and foreclose. Wells Fargo, which acquired the servicing rights to the mortgagors’ loan, scheduled a large-scale event for mortgagors at Gillette Stadium on August 12, 2008. The mortgagors attended the event, standing in line and receiving a ticket prior to meeting with a Wells Fargo representative for about fifteen minutes. Wells Fargo later foreclosed on the property, and the mortgagors raised the alleged absence of a face-to-face meeting as an affirmative defense to the foreclosure.

The Court examined whether the meeting at the stadium satisfied the requirement in the HUD Handbook that representatives who conduct these face-to-face meetings “have the authority to propose and accept reasonable payment plans . . . [because] [t]he interview has little value if the mortgagee’s representative must take proposals back to a superior for a decision.” HUD Handbook, No. 4330.1 REV-5, par. 7-7(c)(3). The mortgagors argued that the representative they spoke with lacked authority to “propose and accept reasonable payment plans” because the representative stated that he was not able to accept payments at the event and did not propose a loss mitigation plan at the stadium event. Wells Fargo, however, argued that a loss mitigation plan did eventually result from the meeting and the representative had authority to propose or accept modification options or set up a payment plan. Based on the disputed facts, the Court refused to grant Wells Fargo’s summary judgment motion, explaining that a fact finder needed to determine whether the representative had sufficient authority and whether an agreement resulted from the meeting. The Court also noted that no “personalized consideration” of the mortgagors, as envisioned by HUD Handbook 4330.1, appeared to have occurred during the 15-minute meeting at Gillette Stadium. According to the Court in Cook, the substance of the face-to-face meeting and the authority of the particular representative determines whether or not the requirements of 24 C.F.R. 203.604(b) have been satisfied.

The authority cited by the Court in Cook is not limited to Massachusetts case law, and, as a result, this holding provides guidance for other states in addition to Massachusetts. Based on the opinion in Cook, servicers holding large-scale meetings for defaulting mortgagors should pay particular attention to whether these meetings could be subject to challenge by disgruntled borrowers.