Banking – ‘Branch’ must handle mortgage business to trigger meeting rule

Where there is a “branch office” within 200 miles of the borrower’s home, federal regulations require a bank to conduct a face-to-face meeting before initiating foreclosure proceedings. However, that obligation is only triggered where the “branch office” conducts some business related to mortgages.

Background

This appeal arises from a dispute over whether a bank was required to conduct a face-to-face meeting with a mortgage borrower before initiating foreclosure proceedings. Federal regulations generally call for such a meeting, but there is an exception for cases in which a mortgage lender does not have a branch office within 200 miles of the borrower’s home.

The question here is whether a bank office that conducts no mortgage-related business qualifies as a “branch office” of a “mortgagee” under the regulatory exception.

Analysis

As the district court explained, the regulations generally require that 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,” and in any event, “at least 30 days before foreclosure is commenced.”

But there are exceptions, and the one that is relevant here applies when “the mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either.” So whether U.S. Bank National Association may avail itself of that exception—or, conversely, whether it was subject to the face-to-face meeting requirement—turns on whether its Richmond office, less than 200 miles from Jacqueline Stepp’s house, is a “mortgagee[’s] … branch office” within the meaning of § 203.604(c)(2).

The court does not think the text of § 203.604(c)(2) can be read to encompass an office at which no mortgage-related business is conducted. It may be, as Stepp argues, that standing alone, the term “branch office” could be read to include any office at which a corporate entity like U.S. Bank does business of any kind. But “branch office” does not stand alone.

Under § 203.604(c)(2), the question is whether U.S. Bank’s Richmond office, devoted exclusively to the management of constructive trusts, is a “branch office of” a “mortgagee” for purposes of a regulation governing face-to-face meetings between mortgage lenders and their borrowers. In that context, this court thinks it clear that what is contemplated, at a minimum, is an office at which some business related to mortgages is done.

That reading also is fully consistent with the purpose of the regulatory scheme.

And, like the district court, this court sees no inconsistency between our construction of § 203.604(c)(2) and that of the Supreme Court of Virginia in Mathews v. PHH Mortgage Corp., 724 S.E.2d 196 (Va. 2012). Finally, defining a mortgagee’s “branch office” as one that conducts mortgage-related business is broadly consistent with the functional approach taken in other banking statutes to the “branch office” question.

Affirmed.

Stepp v. U.S. Bank Trust National Association (Lawyers Weekly No. 001-057-20, 8 pp.) (Pamela Harris, J.) Case No. 19-1067. April 20, 2020. From W.D. Va. (Elizabeth K. Dillon, J.) Henry W. McLaughlin III for Appellant, Thomas J. Cunningham, Tara L. Trifon, Hugh S. Balsam and Jason S. Murphy for Appellees.