[Cite as PNC Mtge. v. Garland, 2014-Ohio-1173.]
                           STATE OF OHIO, MAHONING COUNTY

                                 IN THE COURT OF APPEALS

                                       SEVENTH DISTRICT

PNC MORTGAGE,                                     )
                                                  )   CASE NO. 12 MA 222
        PLAINTIFF-APPELLEE,                       )
                                                  )
        - VS -                                    )         OPINION
                                                  )
COLLEEN M. GARLAND, et al.,                       )
                                                  )
        DEFENDANTS-APPELLANT.                     )


CHARACTER OF PROCEEDINGS:                             Civil Appeal from Common Pleas
                                                      Court, Case No. 11 CV 3760.


JUDGMENT:                                             Affirmed.


APPEARANCES:
For Plaintiff-Appellee:                               Attorney Joshua Epling
                                                      Attorney Barbara Borgmann
                                                      Laurito and Laurito, LLC
                                                      7550 Paragon Road
                                                      Dayton, OH 45459

For Defendants-Appellant:                             Attorney Bruce Broyles
                                                      5815 Market Street, Suite 2
                                                      Boardman, OH 44512



JUDGES:
Hon. Mary DeGenaro
Hon. Gene Donofrio
Hon. Cheryl L. Waite


                                                      Dated: March 20, 2014
[Cite as PNC Mtge. v. Garland, 2014-Ohio-1173.]
DeGenaro, P.J.
        {¶1}    Defendants-Appellant, Colleen Garland, appeals the November 15, 2012
judgment of the Mahoning County Court of Common Pleas granting summary judgment in
favor of Plaintiff-Appellee, PNC Mortgage, in a foreclosure action. On appeal, Garland
asserts that summary judgment was improper because there are genuine issues of
material fact about whether PNC Mortgage complied with the face-to-face meeting
requirements in 24 C.F.R. 203.604 and 203.605 prior to initiating foreclosure and whether
PNC Mortgage provided Garland with a loan modification opportunity in compliance with
the Home Affordable Modification Program (HAMP).
        {¶2}    Upon review, Garland's arguments are meritless. As an issue of first
impression in this district, we hold that 24 C.F.R. 203.604 and 203.65 create conditions
precedent to foreclosure, not affirmative defenses, and are therefore subject to the
pleading requirements contained in Civ.R. 9(C). Garland waived her HUD violation
arguments by failing to plead them with particularity in her Answer pursuant to Civ.R.
9(C).
        {¶3}    With regard to Garland's HAMP arguments, first, this court can consider
Garland's untimely brief in opposition to summary judgment because the magistrate
issued an order setting the matter for hearing in response to Garland's filing and the trial
court never ruled on PNC Mortgage's motion to strike the untimely filing. With regard to
the substantive HAMP arguments, courts have held that borrowers have no standing to
enforce HAMP, or allege HAMP violations as an affirmative defense to foreclosure,
unless there is evidence that the borrower was intended to benefit from the relevant
servicing contract containing the obligation to follow HAMP, or where the HAMP
requirements are specifically incorporated into the borrower's contract with the lender.
Here, there is no reference to the HAMP program or other Treasury Department
directives either in the note or mortgage and Garland put on no evidence that the terms of
any applicable servicing agreement were intended to benefit her. Accordingly, based on
the above, the judgment of the trial court is affirmed.
                                                                                          -2-


                            Facts and Procedural History
      {¶4}   On October 2, 2008, Garland executed and delivered a promissory note to
National City Mortgage, which was insured by the FHA. The note was secured by a
mortgage on the property located at 2226 Hamilton Avenue in Poland. PNC Mortgage is
National City Mortgage's successor by merger and is a division of PNC Bank, N.A.
      {¶5}   The Note provides the following with regard to default:

      If Borrower defaults by failing to pay in full any monthly payment, then
      Lender may, except as limited by regulations of the Secretary in the case of
      payment defaults, require immediate payment in full of the principal balance
      remaining due and all accrued interest. * * * In many circumstances
      regulations issued by the Secretary will limit Lender's rights to require
      immediate payment in full in the case of payment defaults. This Note does
      not authorize acceleration when not permitted by HUD regulations. As used
      in this Note, "Secretary" means the Secretary of Housing and Urban
      Development or his or her designee.

      {¶6}   Similarly the Mortgage provides the following:

             9. Grounds for Acceleration of Debt.
             (a) Default. Lender may, except as limited by Regulations issued by
      the Secretary, in the case of payment defaults, require immediate payment
      in full of all sums secured by this Security Instrument if:
             (i) Borrower defaults by failing to pay in full any monthly payment
      required by this Security Instrument prior to or on the due date of the next
      monthly payment, or
             (ii) Borrower defaults by failing, for a period of thirty days, to perform
      any other obligations contained in this Security Instrument.
             ***
             (d) Regulations of HUD Secretary. In many circumstances
                                                                                        -3-


       regulations issued by the Secretary will limit Lender's rights, in the case of
       payment defaults, to require immediate payment in full and foreclose if not
       paid. This Security Instrument does not authorize acceleration or
       foreclosure if not permitted by regulations of the Secretary.

       {¶7}   On November 22, 2011, PNC Mortgage filed a complaint against Garland
for foreclosure, asserting that terms of the note had been breached and that it was
entitled to judgment in the amount of $97,051.77, plus interest and other expenses.
Attached to the Complaint were the note and mortgage. PNC Mortgage generally pled
that it had satisfied all conditions precedent pursuant to the note and the mortgage.
       {¶8}   On February 29, 2012, as no answer had been filed, PNC Mortgage filed a
motion for default judgment, supported by the affidavit of Jacqueline Murphy, an
authorized signer for PNC Bank N.A., the loan's servicer. Murphy averred that PNC Bank
held a promissory note executed by Colleen Garland, with $97,051.77 at an interest rate
of 6.75% still due, and that Garland had failed to make any payments due on or after
March 1, 2011. She further averred that PNC Bank had therefore elected to "call the
entire balance of said account due and payable, in accordance with the terms of the Note
and Mortgage."
       {¶9}   On April 10, 2012, Garland filed a motion for leave to file an Answer
instanter. As cause for her untimely Answer, she alleged she suffered from a serious
medical condition that affected her memory; that she contacted the Bank to work out a
resolution shortly after receiving the Complaint; and that in the meantime she was also
pursuing a HAMP loan modification.        Moreover, Garland asserted that she had a
meritorious defense to present should she be permitted to answer. Over PNC Mortgage's
objection, the trial court issued an order granting Garland leave to file an Answer.
       {¶10} In her Answer, Garland generally raised a number of defenses, including
that PNC Mortgage failed to comply with "HUD regulations" prior to accelerating the note
and initiating foreclosure. Garland also raised the defense that PNC Mortgage failed to
comply with the Home Affordable Modification Program (HAMP) by failing to review her
                                                                                       -4-


application for a loan modification in a proper and timely fashion and by their decision
finding her ineligible for a loan modification even though her current monthly mortgage
expenses exceeded 31% of her gross monthly income.
       {¶11} On July 17, 2012, PNC Mortgage filed a motion for summary judgment,
referencing the affidavit of Jacqueline Murphy along with the note and mortgage to
demonstrate there were no genuine issues of material fact that Garland was in default of
her obligations under the note and that judgment in its favor was proper. PNC Mortgage
further argued that Garland failed to specify what HUD regulations and what provisions of
HAMP had been violated in her Answer, and that Garland offered nothing to substantiate
her claims that it had violated HAMP or HUD regulations.
       {¶12} On August 28, 2012, Garland filed a brief in opposition to PNC Mortgage's
motion for summary judgment without requesting leave to file an untimely pleading.
Garland argued that PNC Mortgage failed to fulfill conditions precedent to the
acceleration of the note and foreclosure of the mortgage, namely that it had failed to
follow various HUD regulations and failed to properly evaluate her for a modification.
Garland attached her own affidavit in which she averred that PNC Mortgage never offered
her the opportunity to have a face-to-face meeting prior to the initiation of foreclosure
proceedings. Additionally, Garland averred that PNC Mortgage evaluated her case for a
loan modification under HAMP and that prior to the time the complaint was filed, she was
offered modification payments of $1500 to $1600 per month, which far exceeded what
was affordable, as 31% of her gross monthly income was $555.83.
       {¶13} On August 29, 2012, the magistrate issued an order stating: "Due to recent
filings, this matter is continued for 30 days. Hearing set for October 9, 2012 at 2:00 p.m."
       {¶14} On September 12, 2012, PNC Mortgage filed a motion to strike Garland's
brief in opposition to summary judgment because that brief had been filed well beyond
the 14 day deadline provided by Local Rule 6(A)(2), and without leave of court. The trial
court never ruled on this motion.
       {¶15} On November 15, 2012, the trial court sustained PNC Mortgage's motion for
summary judgment and granted the decree in foreclosure, finding no just cause for delay.
                                                                                             -5-


Garland never requested a stay pending appeal.
                                      Summary Judgment
       {¶16} In her sole assignment of error, Garland asserts:
       {¶17} "The trial court erred in granting summary judgment."
       {¶18} When reviewing a trial court's decision to grant summary judgment, an
appellate court applies the same standard used by the trial court and, therefore, engages
in de novo review. Parenti v. Goodyear Tire & Rubber Co., 66 Ohio App.3d 826, 829, 586
N.E.2d 1121 (9th Dist.1990). Under Civ.R. 56, summary judgment is only proper when
the movant demonstrates that, viewing the evidence most strongly in favor of the
nonmovant, reasonable minds must conclude no genuine issue as to any material fact
remains to be litigated and the moving party is entitled to judgment as a matter of law.
Doe v. Shaffer, 90 Ohio St.3d 388, 390, 738 N.E.2d 1243 (2000). A fact is material when
it affects the outcome of the suit under the applicable substantive law. Russell v. Interim
Personnel, Inc., 135 Ohio App.3d 301, 304, 733 N.E.2d 1186 (6th Dist.1999).
       {¶19} When moving for summary judgment, a party must produce some facts that
suggest a reasonable fact-finder could rule in its favor. Brewer v. Cleveland Bd. of Edn.,
122 Ohio App.3d 378, 386, 701 N.E.2d 1023 (8th Dist.1997). "[T]he moving party bears
the initial responsibility of informing the trial court of the basis for the motion, and
identifying those portions of the record which demonstrate the absence of a genuine
issue of fact on a material element of the nonmoving party's claim." Dresher v. Burt, 75
Ohio St.3d 280, 296, 662 N.E.2d 264 (1996). The trial court's decision must be based
upon "the pleadings, depositions, answers to interrogatories, written admissions,
affidavits, transcripts of evidence, and written stipulations of fact, if any, timely filed in the
action." Id., citing Civ.R. 56(C). The nonmoving party has the reciprocal burden of
specificity and cannot rest on the mere allegations or denials in the pleadings. Id. at 293.
       {¶20} Garland asserts there are genuine issues of material fact concerning
whether PNC Mortgage complied with certain HUD regulations, which were conditions
precedent in the note and mortgage, prior to accelerating the balance of the note and
initiating foreclosure proceedings. Specifically, Garland asserts that PNC Mortgage failed
                                                                                        -6-


to attempt to arrange a face-to-face meeting with her and failed to properly evaluate her
for loss mitigation prior to filing its complaint. See, e.g., 24 C.F.R. 203.604 (contact with
mortgagor) and 24 C.F.R. 203.605 (loss mitigation). Garland claims the affidavit she filed
in support of her brief in opposition to summary judgment creates genuine issues of
material fact on these issues. PNC Mortgage presents several arguments in response.
The arguments raised by the parties will be discussed out of order for ease of analysis.
                       Condition Precedent or Affirmative Defense
       {¶21} PNC Mortgage asserts Garland waived her 24 C.F.R. 203.604 (face-to-face
meeting) and 24 C.F.R. 203.605 (loss mitigation) arguments by failing to plead them with
particularity in her Answer pursuant to Civ.R. 9(C). Before we can address the waiver
issue we must make a more fundamental determination as a matter of first impression in
this district; whether 24 C.F.R. 203.604 and 203.605 create conditions precedent or
provide affirmative defenses. "Whereas an affirmative defense is separate from the
merits of the plaintiff's cause of action and bars recovery even when the plaintiff has
established a prima facie case, a condition precedent is directly tied to the merits of the
plaintiff's cause of action, which is itself contingent upon satisfaction of the condition."
National City Mortg. Co. v. Richards, 182 Ohio App.3d 534, 2009-Ohio-2556, 913 N.E.2d
1007, ¶20 (10th Dist.).
       {¶22} As recognized recently by the Second District, the condition precedent
versus affirmative defense controversy with respect to compliance with HUD regulations
has been often recognized by courts, yet rarely decided. Wells Fargo Bank, N.A., v.
Goebel. 2d Dist. No. 25745, N.E.3d , 2014-Ohio-472, ¶16. See, e.g., BAC Home
Loans Servicing, LP v. Taylor, 2013-Ohio-355, 986 N.E.2d 1028, ¶17 (9th Dist.)
(concluding it need not consider the distinction in the absence of any argument that
homeowners waived the argument). Recently, in Wells Fargo Bank, N.A., v. Aey, 7th
Dist. No. 12MA178, 2013-Ohio-5381, this court held that 24 C.F.R. 203.604 and 203.605
could be used "defensively" in a foreclosure action, but did not have to reach the issue of
whether those HUD regulations were conditions precedent or affirmative defenses to
foreclosure. Id. at ¶37-38.
                                                                                       -7-


       {¶23} Now the issue is squarely before us. The distinction is important because
each carries with it a different burden for pleading and summary judgment practice. For
example, if compliance with the above HUD regulations is a condition precedent, the bank
must generally aver in its complaint that it has complied with all conditions precedent, the
borrower then has a reciprocal burden to allege with specificity and particularity how the
bank failed to comply. Civ.R. 9(C). In a motion for summary judgment, the bank would
then bear the burden of establishing the absence of any issue of material fact on the
issue of whether it complied with the specific HUD regulation. See Dresher at 294; U.S.
Bank, N.A. v. Detweiler, 191 Ohio App.3d 464, 2010-Ohio-6408, 946 N.E.2d 777, ¶54-57
(face-to-face meeting is condition precedent); LSF6 Mercury REO Investments Trust v.
Locke, 10th Dist. No. 11AP–757, 2012-Ohio-4499, ¶11 (notice is condition precedent);
Civ.R 56(E); Dresher at 294.
       {¶24} Alternatively, if compliance is deemed an affirmative defense, the bank has
no pleading burden in its complaint; the borrower must generally allege non-compliance
as an affirmative defense in its answer. And on summary judgment, the bank has no
burden to discuss compliance with HUD regulations in its motion, whereas the borrower
bears the burden of proving its affirmative defense via the brief in opposition to summary
judgment. See, e.g., Goebel, supra, at ¶19.
       {¶25} Resolution of this issue requires us to analyze the overall regulatory scheme
established by HUD, express language of particular sections, as well as case law
discussing other particular sections from the regulatory scheme than those at issue here.
We hold that compliance with HUD regulations is properly characterized as a condition
precedent for pleading purposes in foreclosure litigation.
       {¶26} First, the overall regulatory scheme enacted by HUD must be considered.
Importantly, 24 C.F.R. 203.500 states: "It is the intent of the Department [of Housing and
Urban Development] that no mortgagee shall commence foreclosure * * * until the
requirements of this subpart have been followed." As to specific regulatory language
pertinent to this appeal, 24 C.F.R. 203.606(a) provides: "Before initiating foreclosure, the
mortgagee must ensure that all servicing requirements of this subpart have been met.
                                                                                      -8-


The mortgagee may not commence foreclosure for a monetary default unless at least
three full monthly installments due under the mortgage are unpaid * * *." Servicing
requirements include the face-to-face meeting in 24 C.F.R. 203.604(b) which provides:
"The 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. * * *." Subsection (c) goes on to provide several exceptions to
the face-to-face meeting requirement. Finally, the evaluation for loss mitigation is
required by 24 C.F.R. 203.605(a): "Before four full monthly installments due on the
mortgage have become unpaid, the mortgagee shall evaluate on a monthly basis all of
the loss mitigation techniques provided at 203.501 to determine which is appropriate.
Based upon such evaluations, the mortgagee shall take the appropriate loss mitigation
action. * * * "
        {¶27} These regulations evince HUD's clear intent that banks must comply with
the face-to-face interview and loss mitigation evaluation requirements before commencing
foreclosure actions. In other words, a bank's foreclosure action is contingent upon
satisfaction of these regulations and is therefore a condition precedent.
        {¶28} Second, case law from this and other districts hold that allegations
regarding noncompliance with notice provisions in notes and mortgages are not only
conditions precedent to foreclosure, they also are subject to Civ.R. 9(C). See Huntington
v. Popovec, 7th Dist. No. 12 MA 119, 2013-Ohio-4363, ¶15; First Financial Bank v.
Doellman, 12th Dist. No. CA2006-02-029, 2007-Ohio-222, ¶20-21. Compliance with the
HUD regulations implicated here is analogous to compliance with notice requirements in
Popovec and Doellman.
         {¶29} We recognize that our decision today is contrary to one reached very
recently by the Second District in Goebel, supra, 2014-Ohio-472, at ¶23-25, holding that a
bank's failure to comply with 24 C.F.R. 203.604 is an equitable affirmative defense.
However, opinions of our sister districts are merely persuasive, not binding. Further, even
though the Goebel court conceded it was the clear intent of HUD that no bank shall
commence foreclosure until the servicing requirements have been met, the court
                                                                                         -9-


nonetheless rejected the condition precedent approach. Id. at ¶25. It did so because it
determined such a construction would be "unduly harsh" to the lender, insofar as "many
of the regulations impose a deadline for a lender to act[,] [and] [o]nce a particular
deadline has expired, the particular servicing requirement would forever prevent
foreclosure." (Emphasis added.) Id. at ¶23, fn. 4.
        {¶30} We disagree with this conclusion. Under our reading of the regulations, the
specific time deadlines referenced by the court are aspirational, whereas the obligation to
perform those conditions (i.e., the requirement to actually have a face-to-face meeting,
absent one of the stated exceptions), is mandatory. For example, if a bank commences a
foreclosure action at the earliest possible time, the day after the third payment is missed,
the bank's failure to have the face-to-face meeting within the first three months of default,
would, absent one of the exceptions, bar the bank from filing the foreclosure action. On
the other hand, if the bank waited until the borrower missed six payments, for example,
the bank's failure to have the face-to-face meeting within the first three months of default,
would not bar the foreclosure action, as long as the bank held the meeting sometime
before filing the action; e.g. in the fourth or fifth month. Accordingly, we decline to follow
Goebel.
        {¶31} Thus, for all of the above reasons, we hold that compliance with the stated
HUD regulations is a condition precedent, subject to the pleading requirements of Civ.R.
9(C).
                                              Waiver
        {¶32} Having determined that 24 C.F.R. 203.604 and 203.605 create conditions
precedent to foreclosure, we turn to PNC Mortgage's assertion that Garland waived her
24 C.F.R. 203.604 arguments by failing to plead them with particularity in her Answer.
Civ.R. 9(C) provides: "In pleading the performance or occurrence of conditions precedent,
it is sufficient to aver generally that all conditions precedent have been performed or have
occurred."    By contrast, "[a] denial of performance or occurrence shall be made
specifically and with particularity." (Emphasis added.) Id. Conditions precedent that are
not denied in the manner provided by Civ.R. 9(C) are deemed admitted. Fifth Third Mtge.
                                                                                      - 10 -


Co. v. Orebaugh, 12th Dist. No. CA2012–08–153, 2013-Ohio-1730, ¶29, citing First
Financial Bank v. Doellman, 12th Dist. No. CA2006–02–029, 2007-Ohio-222, ¶2; see also
Civ.R. 8(D); Huntington v. Popovec, 7th Dist. No. 12 MA 119, 2013-Ohio-4363, ¶15.
       {¶33} Here, PNC Mortgage alleged in its Complaint that "it has satisfied all
conditions precedent pursuant to the Promissory Note[,]" and that it "has satisfied all
conditions precedent pursuant to the Mortgage." This is sufficient under Civ.R. 9(C) to
shift the burden to Garland to assert non-compliance with specific HUD regulations.
       {¶34} In her Answer, Garland's allegations regarding non-compliance with HUD
regulations were general in nature; she did not cite to any specific regulations:

              11. Plaintiff failed to comply with the regulations issued by the
       Secretary of Housing and Urban Development in order to require immediate
       payment in full and Plaintiff failed to comply with HUD regulations prior to
       acceleration of the amounts due under the promissory note.
              12. Plaintiff failed to comply with the regulations issued by the
       Secretary of Housing and Urban Development in order to require immediate
       payment in full and Plaintiff failed to comply with HUD regulations prior to
       acceleration of the amounts due under the mortgage.

       {¶35} Because Garland failed to state with the specificity required by Civ.R. 9(C),
precisely which HUD regulations PNC Mortgage failed to comply with before filing the
instant foreclosure action, she was barred from later contesting the noncompliance in her
brief in opposition to summary judgment, and consequently, now on appeal. See, e.g.,
Satterfield v. Adams Cty./Ohio Valley School Dist., 4th Dist. No. 95CA611, 1996 WL
655789, *5 (Nov. 6, 1996) (where defendant failed to specifically deny performance of a
condition precedent in its answer pursuant to Civ.R. 9(C) compliance was deemed
admitted and defendant could not subsequently raise the issue on appeal.) See also
Huntington, supra at ¶16 (homeowner was barred from contesting bank's performance of
conditions precedent where she failed to file an answer.)
                                                                                        - 11 -


                                 Untimely Opposition Brief
       {¶36} PNC Mortgage additionally argues that because Garland's brief in
opposition to summary judgment and accompanying affidavit were untimely filed without
leave of court, the trial court properly disregarded them and granted summary judgment in
PNC Mortgage's favor. Since Garland has waived her HUD violation arguments, we only
need to consider this argument as it relates to her argument that PNC Mortgage failed to
properly evaluate her for a loan modification pursuant to the Home Affordable
Modification Program (HAMP).
       {¶37} Garland did specifically allege in her Answer that PNC Mortgage failed to
comply with HAMP by failing to review her application for a loan modification in a proper
and timely fashion and by their decision finding her ineligible for a loan modification even
though her current monthly mortgage expenses exceeded 31% of her gross monthly
income. Garland also argued in her brief in opposition to summary judgment, and avers
in her attached affidavit, that PNC Mortgage failed to properly evaluate her for a loan
modification pursuant to HAMP.
       {¶38} Civ.R. 56(C) provides: "The motion shall be served at least fourteen days
before the time fixed for hearing. The adverse party, prior to the day of hearing, may
serve and file opposing affidavits." However, Local Rule of Civil Procedure 6(A)(2)
provides that opposition briefs to all motions shall be filed not later than 14 days from the
date the motion was filed unless an extension is granted with leave of court. That rule
continues to state, "In no event shall an opposition brief be filed later than 5 days prior to
the non-oral hearing date."
       {¶39} Here, there was no hearing date set at the time Garland filed her untimely
brief in opposition, thus, Civ.R. 56(C) would not apply. Under Local Rule 6(A)(2),
Garland's brief in opposition was due by 14 days after the motion was filed on July 17,
2012, which would be July 31, 2012. Garland submitted her brief in opposition four
weeks late, on August 28, 2012, without seeking leave of court to do so.
       {¶40} However, the day after Garland filed her untimely opposition brief the
magistrate issued an order stating: "Due to recent filings, this matter is continued for 30
                                                                                          - 12 -


days. Hearing set for October 9, 2012 at 2:00 p.m." Although PNC Mortgage moved to
strike Garland's untimely brief, the trial court never ruled on that motion. Typically, where
a trial court fails to rule on a pending pre-trial motion and proceeds to judgment, there is a
presumption that it was overruled. See Scott v. Falcon Transport. Co., 7th Dist. No. 02
CA 145, 2003-Ohio-6725, ¶9.
         {¶41} Looking at the totality of the circumstances in this case, i.e., the magistrate's
order setting a hearing date in response to Garland's untimely filing, the trial court's failure
to rule on the motion to strike the untimely filing, and out of considerations of fairness, we
will consider Garland's untimely brief in opposition as part of our de novo review.
                              HAMP as a Defense to Foreclosure
         {¶42} HAMP program directives are distinct from the HUD regulations; HAMP is a
program initiated by the United States Treasury pursuant to the Emergency Economic
Stabilization Act (EESA), 12 U.S.C. 5201, et seq., which was enacted by Congress in
response to the economic downturn of 2008. There is a dearth of Ohio case law
concerning the use of HAMP as a defense to foreclosure. However, the Second District,
applying federal case law and Ohio third-party beneficiary law, held that unlike HUD
violations, HAMP violations ordinarily cannot constitute a defense to foreclosure; unless
there is evidence the borrower was intended to benefit from the servicing contract or
where the HAMP requirements are incorporated into the borrower's contract. See
CitiMortgage, Inc. v. Carpenter, 2d Dist. No. 24741, 2012-Ohio-1428, ¶2, ¶14, citing
Edwards v. Aurora Loan Servs., LLC, 791 F.Supp.2d 144, 152-153 (D.D.C.2011); Markle
v. HSBC Mortgage Corp. (USA), 844 F.Supp.2d 172, (D.Mass. 2011); Marks v. Bank of
America, N.A, D. Ariz. No. 03:10–cv–08039–PHX–JAT, 2010 WL 2572988, *5–7; Warren
v. U.S. Bank of America, S.D. Ga No. 4:11–cv–70, 2011 WL 2116407, *2–5 (May 24,
2011).
         {¶43} As explained by the Second District, the Treasury was granted broad
discretionary authority under the Emergency Economic Stabilization Act (EESA), 12
U.S.C. 5201, et seq. to implement foreclosure mitigation efforts, pursuant to which the
Treasury introduced HAMP. " 'HAMP was aimed at helping homeowners who were in or
                                                                                     - 13 -


were at immediate risk of being in default on their home loans by reducing monthly
payments to sustainable levels.' * * * HAMP works by providing financial incentives to
participating mortgage servicers to modify terms of eligible loans.' " (Citations omitted.)
Carpenter at ¶12.
       {¶44} "Participants in HAMP include servicers with loans guaranteed by
Government Sponsored Enterprises (GSE), such as Fannie Mae and Freddie Mac, as
well as loans that are not guaranteed, known as non-GSE loans. * * * 'The Department of
the Treasury and Fannie Mae have issued a series of directives that provide guidance to
mortgage servicers implementing HAMP.' " (Citations omitted.) Carpenter at ¶13.
       {¶45} Those "[s]ervicers who enter into a contract with Fannie Mae and have their
loans guaranteed by Fannie Mae are required to participate in HAMP and to abide by
Fannie Mae servicing guides and bulletins, which are expressly incorporated into the
servicing contact." Carpenter at ¶13, citing Markle v. HSBC Mortgage Corp. (USA), 844
F.Supp.2d 172, (D.Mass. 2011). Other servicers who enter into a contract with Freddie
Mac to have the loans guaranteed by Freddie Mac are subject to similar requirements.
This was the factual situation in Carpenter. See id. In addition, "[n]on–GSE servicers
who opt into participating in HAMP by signing a Servicer Participation Agreement (SPA)
are also required to evaluate borrowers for HAMP eligibility and must abide by Treasury's
handbooks and directives." Carpenter at ¶13, citing Markle; Edwards v. Aurora Loan
Serv.'s, LLC, 791 F.Supp.2d 144, 147 (D.D.C.2011). (It seems unclear from the record
which of those situations exist in this case.)
       {¶46} However, regardless of whether the loan is guaranteed by a GSE or is a
non-GSE loan, where the servicer has opted to participate in HAMP the obligation for the
servicer to participate in HAMP is contained in a separate contract, to which the borrower
is not a party (either a servicer participation agreement between the federal government
and the servicer, or a servicing contract between the servicer and Fannie Mae or Freddie
Mac, as applicable). Accordingly, as a general matter, "regardless of whether a servicer
is the holder of a GSE loan or a non-GSE loan, most courts have found that borrowers do
not have standing to enforce the terms of HAMP as third-party beneficiaries." Carpenter
                                                                                           - 14 -


at ¶14.
       {¶47} This is so because, as the Second District went on to explain, under third
party beneficiary law the borrower cannot use HAMP violations as a defense unless the
borrower has presented evidence that she was intended to benefit from the servicing
contract or where the HAMP requirements are specifically incorporated in the borrower's
contract:

       "Only a party to a contract or an intended third-party beneficiary of a
       contract may bring an action on a contract in Ohio." Grant Thornton v.
       Windsor House, Inc., 57 Ohio St.3d 158, 161, 566 N.E.2d 1220 (1991).
            An affirmative defense, like a cause of action, is a claim of right. In a
       cause of action, the claim of right is a claim to relief; in an affirmative
       defense, the claim of right is the avoidance of liability under another's claim
       to relief. It follows then, that a party seeking to assert an affirmative defense
       under a contract must either be a party to the contract or an intended third-
       party beneficiary of a contact. In the HAMP context, a New York court
       concluded that, "an alleged breach of the [HAMP Service Provider]
       Agreement cannot form the basis of a defense, because [the borrower]
       cannot be considered an intended beneficiary of the Agreement, as there is
       neither evidence nor allegation that it was [the bank's] intention to benefit
       homeowners in entering into the Agreement." Wells Fargo Bank v. Small,
       2010 N.Y. Slip Op 30424U, *5, 2010 N.Y. Misc. LEXIS 2478 (N.Y.Sup.Ct.
       Feb. 16, 2010).
       ***
               Carpenter contends that there is a genuine issue of material fact
       whether the evaluation she received conformed with Freddie Mac Bulletin
       2009–28 and the Treasury's Supplemental Directive 09–08. But that issue
       of fact can only be material if Carpenter had an affirmative defense to this
       foreclosure action based on CitiMortgage's alleged non-conformity.
                                                                                      - 15 -


      Carpenter does not contend that she is an intended third-party beneficiary
      to the contract between Citimortgage and Freddie Mac. Carpenter asserts
      that she has an affirmative defense, even though she is not a beneficiary to
      the servicer contract, due to "CitiMortgage's failure to follow Freddie Mac
      Bulletin [20]09–28 and HAMP Supplemental Directive 09–08." We
      disagree. In order for Carpenter to have an affirmative defense based upon
      the contract terms between CitiMortgage and Freddie Mac—terms
      incorporating Freddie Mac Bulletins and Treasury Supplemental
      Directives—Carpenter had to have presented evidence establishing a
      genuine issue of material fact as to her status as an intended third-party
      beneficiary to the servicer contract. She did not present any evidence of
      that. Therefore, Carpenter has no standing to assert an affirmative defense
      on her loan contract, and CitiMortgage is entitled to judgment as a matter of
      law. * * *
             Even without being an intended third-party beneficiary of the servicer
      contract between CitiMortgage and Freddie Mac, Carpenter would be
      entitled to an affirmative defense based upon CitiMortgage's failure to have
      complied with HAMP servicing requirements if those requirements had
      been incorporated in her contract with CitiMortgage. Neither Carpenter nor
      Citimortgage presented evidence that the terms of the contract between
      CitiMortgage and Freddie Mac were incorporated into Carpenter's note or
      mortgage. Therefore, this potential avenue for an affirmative defense of
      non-compliance with HAMP servicing requirements is not available to her.

Carpenter at ¶15-17.
      {¶48} Similarly here, Garland put on no evidence that the terms of any servicing-
related contract that the servicer, PNC Bank, may have entered into, were intended to
benefit Garland as the borrower.     Further, unlike the HUD regulations, which are
specifically referenced in the note and mortgage, there is no mention of the HAMP
                                                                                       - 16 -


requirements in those instruments. For this reason alone, Garland's HAMP argument is
meritless.
        {¶49} Further, even if HAMP violations could be used as a defense to foreclosure,
there seems to be an additional evidentiary issue: the trial court never took judicial notice
of the HAMP directives. Unlike the HUD requirements, which are contained in the Code
of Federal Regulations and have the force of law, HAMP requirements are found in
directives put forth by the U.S. Treasury and do not have the full force and effect of law.
See Carpenter at ¶13 citing the Treasury Directives found at https://www.hmpadmin.com/
and Carpenter at ¶22, ¶25. It appears trial courts can take judicial notice of the HAMP
directives, see, e.g., Caires v. J.P. Morgan Chase Bank, N.A., 880 F.Supp.2d 288, 304
(D.Conn. 2012) (citing cases), but no request was made for the trial court to do so in this
case.
        {¶50} In any event, Garland's affidavit in support of her brief in opposition to
summary judgment demonstrates that she was evaluated under HAMP and was in fact
offered a modification, but that she rejected it because the terms were not favorable
enough for her. PNC Mortgage is correct that Garland has pointed to no portion of any
applicable directive or regulation that requires lenders to structure loan modifications
based solely on what the borrower has alleged she is able to pay. Accordingly, Garland's
HAMP arguments are meritless.
                                         Conclusion
        {¶51} Compliance with the HUD regulations at issue herein, 24 C.F.R. 203.604
and 203.65 is properly characterized as a condition precedent for pleading purposes in
foreclosure litigation. Thus, a bank must generally plead in its complaint that it has
complied with the HUD regulations, which shifts the burden to the borrower to plead with
particularity in the answer, pursuant to Civ.R. 9(C), which specific regulations were not
complied with, in order to preserve the issue. Then upon summary judgment, the burden
shifts back again to the bank, which must provide evidence sufficient to dispel a genuine
issue of material fact, that it complied with the specific HUD regulation raised by the
borrower in its answer. Here, PNC generally averred in its complaint that it complied with
                                                                                      - 17 -


all HUD regulations prior to filing foreclosure proceedings. However, Garland waived her
HUD violation arguments by failing to plead them with particularity in her answer pursuant
to Civ.R. 9(C).
       {¶52} With regard to Garland's substantive HAMP arguments, courts have held
that borrowers have no standing to enforce HAMP, or allege HAMP violations as an
affirmative defense to foreclosure, unless there is evidence that the borrower was
intended to benefit from the relevant servicing contract containing the obligation to follow
HAMP or where the HAMP requirements are specifically incorporated into the borrower's
contract with the lender. Here, there is no reference to the HAMP program or other
Treasury Department directives in either the note or mortgage and Garland put on no
evidence that the terms of any applicable servicing agreement were intended to benefit
her. Accordingly, based on the above, the judgment of the trial court is affirmed.
Donofrio, J., concurs.
Waite, J., concurs.
