                                     PUBLISHED

                     UNITED STATES COURT OF APPEALS
                         FOR THE FOURTH CIRCUIT


                                     No. 19-1067


JACQUELINE DAWN STEPP,

                   Plaintiff - Appellant,

            v.

U.S. BANK TRUST NATIONAL ASSOCIATION; ALG TRUSTEE, LLC,

                   Defendants - Appellees,


Appeal from the United States District Court for the Western District of Virginia at
Harrisonburg. Elizabeth Kay Dillon, District Judge. (5:18-cv-00052-EKD-JCH)


Submitted: March 17, 2020                                   Decided: April 20, 2020


Before KEENAN, WYNN, and HARRIS, Circuit Judges.


Affirmed by published opinion. Judge Harris wrote the opinion, in which Judge Keenan
and Judge Wynn joined.


Henry W. McLaughlin, III, LAW OFFICE OF HENRY MCLAUGHLIN, P.C., Richmond,
Virginia, for Appellant. Thomas J. Cunningham, West Palm Beach, Florida, Tara L.
Trifon, Hartford, Connecticut, Hugh S. Balsam, LOCKE LORD LLP, Chicago, Illinois;
Jason S. Murphy, ORLANS PC, Leesburg, Virginia, for Appellees.
PAMELA HARRIS, Circuit Judge:

       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.

Like the district court, we think it does not, and so we affirm the district court’s judgment.



                                              I.

       Jacqueline Stepp obtained a mortgage to purchase a home in Page County, Virginia.

The mortgage note was assigned to U.S. Bank Trust National Association, which has

remained the noteholder. When Stepp fell more than three months behind on her mortgage

payments, U.S. Bank instructed ALG Trustee, LLC, to foreclose on her home, and ALG

commenced foreclosure proceedings.

       Stepp filed a complaint in federal court against U.S. Bank and ALG, seeking

damages and rescission of the foreclosure. According to Stepp, U.S. Bank improperly

initiated foreclosure without first offering her a face-to-face meeting, as required by

regulations promulgated by the Department of Housing and Urban Development (“HUD”)

and incorporated into Stepp’s deed of trust. See 24 C.F.R. § 203.604(b). U.S. Bank and

ALG moved to dismiss the complaint, arguing that U.S. Bank was exempt from the face-

to-face meeting requirement under 24 C.F.R. § 203.604(c)(2), which excuses the meeting

                                              2
when the “mortgaged property is not within 200 miles of the mortgagee, its servicer, or a

branch office of either.” Because U.S. Bank’s Richmond office – the only one within 200

miles of Stepp’s home – conducted no mortgage-related business and was not open to the

public, U.S. Bank contended, it did not qualify as a “branch office” of a “mortgagee,” and

so the exception applied.

       The district court agreed with U.S. Bank and dismissed Stepp’s complaint. See

Stepp v. U.S. Bank Nat’l Ass’n, No. 5:18-CV-00052, 2018 WL 6625081 (W.D. Va. Dec.

18, 2018). In ruling on the motions to dismiss, the district court properly credited the

factual allegations in Stepp’s complaint, as well as Stepp’s admissions, assuming that U.S.

Bank had not offered a face-to-face meeting with Stepp prior to foreclosing; that its

Richmond office is within 200 miles of Stepp’s house; and – critically – that the Richmond

office, which handles constructive trusts, does not provide mortgage origination or

mortgage servicing and is not open to the public.        See id. at *7–8.     Under those

circumstances, the court concluded, U.S. Bank’s Richmond office was not a mortgagee’s

“branch office” within the meaning of 24 C.F.R. § 203.604(c)(2).

      Instead, the court held, the “proper interpretation of a ‘mortgagee’s branch office’

is one where some business related to mortgages is conducted.” Id. at *8. Stepp’s broader

reading, the court reasoned, would make any office of a corporate entity like U.S. Bank,

which offers a whole variety of financial services, into a “branch office” of a “mortgagee”

for purposes of the face-to-face meeting requirement. “But where – as here – the location’s

business is completely unrelated to mortgaging functions and also where – as here – the



                                            3
office provides no public access, it defies common sense to conclude that it can constitute

a ‘branch office’ for purposes of this regulation.” Id.

       That understanding of § 203.604(c)(2), the court went on, was consistent with the

Supreme Court of Virginia’s decision in Mathews v. PHH Mortgage Corp., 724 S.E.2d 196

(Va. 2012), on which Stepp chiefly relied. In that case, the state supreme court rejected

the position that a “branch office” of a “mortgagee” should be limited to offices engaged

in mortgage loan servicing, as opposed to mortgage loan origination; instead, “branch

office” covered “every type of business and service supplied by the mortgagee.” Id. at 204.

That definition, the district court explained, “makes sense where the office under

consideration was still part of the mortgage business. But it makes little sense here, where

the purported ‘branch office’ does not offer any services related to mortgages . . . .” Stepp,

2018 WL 6625081, at *7.

       Finally, the court noted, its reading of a § 203.604(c)(2) “branch office” aligned

with the functional approach taken to defining “branch office” under a different banking

statute. Id. at *8 (discussing Cades v. H & R Block, Inc., 43 F.3d 869 (4th Cir. 1994)). It

also was supported by the recent decision in Peralta v. U.S. Bank, No. 17-cv-263, 2018

WL 2971119, at *1–2 (D.R.I. April 17, 2018), holding that a bank office that does not

originate, underwrite, or service mortgage loans is not the “branch office” of a “mortgagee”

under the regulation – while Stepp was unable to identify any case adopting her broader

reading. See Stepp, 2018 WL 6625081, at *8.

       Stepp timely appealed the dismissal of her complaint.



                                              4
                                            II.

       We review de novo the district court’s dismissal for failure to state a claim, see

Loftus v. Bobzien, 848 F.3d 278, 284 (4th Cir. 2017), and need address only one question:

Does a bank office qualify as a “branch office” of a “mortgagee” under 24 C.F.R.

§ 203.604(c)(2) if it does not conduct any mortgage-related business? 1 Like the district

court, we conclude that it does not.

       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.” See 24

C.F.R. § 203.604(b). But there are exceptions, and the one that is relevant here applies

when “[t]he mortgaged property is not within 200 miles of the mortgagee, its servicer, or a

branch office of either.” Id. at § 203.604(c)(2). So whether U.S. Bank 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 Stepp’s

house, is a “mortgagee[’s] . . . branch office” within the meaning of § 203.604(c)(2).

       We do 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



       1
          U.S. Bank and ALG have not cross-appealed or otherwise questioned the district
court’s threshold determination that Stepp, who declared bankruptcy after the foreclosure
at issue, regained the right to pursue her civil claim on her own behalf when the bankruptcy
trustee abandoned any interest in that claim. See Stepp, 2018 WL 6625081, at *6.

                                             5
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.

See Lynch v. Jackson, 853 F.3d 116, 121 (4th Cir. 2017) (citation omitted) (words of a

statute are construed in “context,” not “in isolation”). 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,” 24 C.F.R. § 203.604(c)(2)

(emphasis added), for purposes of a regulation governing face-to-face meetings between

mortgage lenders and their borrowers. In that context, we think 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. The

face-to-face meeting regulation was promulgated under 12 U.S.C. § 1715u(a), which

requires mortgagees holding federally insured loans, such as Stepp’s, to “engage in loss

mitigation actions” in order to “provid[e] an alternative to foreclosure.” 2 The regulation

advances that statutory objective by making in-person meetings available, where

reasonably feasible, to facilitate the discussion of loss-mitigation options. But an office

that does no mortgage-related business at all, even if within 200 miles of a mortgagor’s



        2
         The general authorization for the relevant HUD regulations appears at 12 U.S.C.
§ 1715b, enabling HUD to promulgate regulations to carry out the insured loan program.
HUD issued the face-to-face meeting regulation under both 12 U.S.C. 1715b and 12 U.S.C.
§ 1715u(a). See Single Family Mortgage Insurance on Indian Reservations and Other
Restricted Lands, 51 Fed. Reg. 21866, 21871 (June 16, 1986); see also Mathews, 724
S.E.2d at 205 n.6.

                                             6
home, will be poorly positioned to discuss the mortgage-specific loss-mitigation options

outlined by statute, “such as special forbearance, loan modification, preforeclosure sale,

support for borrower housing counseling, subordinate lien resolution, borrower incentives,

and deeds in lieu of foreclosure.” See 12 U.S.C. § 1715u(a).

       Like the district court, we see no inconsistency between our construction of

§ 203.604(c)(2) and that of the Supreme Court of Virginia in Mathews. As described

above, the Mathews court rejected a narrower reading of “branch office” – based on a since-

deleted “frequently asked questions” section of the Department of Housing and Urban

Development website – that would have confined that term to offices in which mortgagees

service, rather than originate, mortgage loans. See Stepp, 2018 WL 6625081, at *7 & n.9;

Mathews, 724 S.E.2d at 203–05. Instead, the court concluded, the term “branch office” of

a “mortgagee” unambiguously includes an office engaged in mortgage origination, as well

as mortgage servicing; either way, the office is the location of “business and service[s]

supplied by the mortgagee.” Mathews, 724 S.E.2d at 204. Nothing about that holding –

under which the provision of some form of mortgage-related service is the key to

§ 203.604(c)(2)’s application – conflicts with our determination that an office that conducts

no mortgage-related business does not qualify as a § 203.604(c)(2) “branch office.” Nor

has Stepp identified any other case adopting her contrary view and finding that an office

engaged solely in non-mortgage-related business constitutes a “branch office” of a

“mortgagee” for purposes of the face-to-face meeting requirement.

       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

                                             7
statutes to the “branch office” question. See Stepp, 2018 WL 6625081, *8. In Cades v.

H & R Block, Inc., for instance, we considered 12 U.S.C. § 36, which governs “branch

banks,” and recognized that an office will not qualify unless it transacts “branch business

by accepting deposits, paying checks, or lending money.” 43 F.3d at 874; see also 12

U.S.C. § 36(j) (defining “branch” to include any “branch office” at which “deposits are

received, or checks paid, or money lent”). Here, of course, we are dealing with a different

regulation, and neither the regulation nor the statute under which it was promulgated

provides a definition of “branch office.” But we agree with the district court that applying

the same functional analysis to § 203.604(c)(2) produces a “common sense” definition of

“branch office” consistent with the regulatory text and purpose. See Stepp, 2018 WL

6625081, *8.



                                            III.

       We affirm the district court’s judgment granting the defendants’ motions to dismiss.

                                                                               AFFIRMED




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