PNC Mortg. v. Maruca, No. 321-4-10 Rdcv (Teachout, J., Feb. 17, 2012)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
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                                                STATE OF VERMONT

SUPERIOR COURT                                                                                   CIVIL DIVISION
Rutland Unit                                                                               Docket No. 321-4-10 Rdcv


PNC MORTGAGE

v.

PAMELA LANDO MARUCA



                                        DETERMINATION AND ORDER
                                            Foreclosure Mediation


        A hearing was held on January 30, 2012 pursuant to 12 V.S.A. § 4635(a) and the
Entry Order of August 2, 2011 to determine whether Plaintiff has complied with its
obligations under 12 V.S.A. § 4633(a)(1). Plaintiff was represented by Attorney Andrew
Montroll, and a representative of Plaintiff attended. Defendant was present through her
attorney-in-fact and was represented by Attorney Heather Z. Cooper.

       It is undisputed that when Defendant originally applied for the mortgage loan, in
determining eligibility, the lender relied on not only her income, but the income of other
members of her extended household. The Defendant and the other household members
continue to reside in the home, and continue to receive income from the same sources.

        This Court, the Hon. William Cohen presiding, denied a motion for summary
judgment on August 30, 2010, stating that: “The Plaintiff must prove standing and the
debt. Also, Plaintiff must have clean hands in regards to attempting a workout.” Thus,
Plaintiff’s standing has not yet been proved. Nonetheless, the Defendant elected to
proceed with foreclosure mediation.

        Foreclosure mediation took place on February 23, 2011 and March 2, 2011. The
Mediator reported that “Lender stated there was no authority to consider contribution or
co-habitant income based upon investor prohibition for farm loan, despite use of same
income for original application.” Defense counsel represents, unrefuted, that at the
mediation, PNC refused to provide a copy of any documents showing who the investor is
and the basis for a prohibition of consideration of co-habitant income. It is also unrefuted
that when the income of the co-habitants is included, as was done originally, there is
sufficient income to qualify for a modification. Defendant also contends that standing
was not shown at the mediation, and that PNC has never disclosed whether its own status
is as mortgage holder or servicer, nor the identity of the investor prohibiting
consideration of co-habitant income.

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        Plaintiff made an offer of proof, which Defendant did not contest and which the
Court accepts, that the loan is insured by the Rural Housing Services of the USDA, and
that federal regulations apply to such loans. Plaintiff identified the USDA as the investor,
and claimed that under the federal regulations, only the borrower’s income can be
considered. Defendant’s counsel, who was present at the mediation, said that this was all
news—that Plaintiff had never identified the USDA as the investor in the loan, and had
refused to provide documentation of the prohibition on which it relied. She noted that the
disclosure of this information approximately a year after the mediation had increased the
arrearages and late fees.

         The mortgagee’s obligations under the mortgage foreclosure statute, 12 V.S.A. §
4631 et seq., specifically include the requirement to produce a copy of a “pooling and
servicing or other similar agreement [that] prohibits modification.” 12 V.S.A. § 4633
(a)(3). In addition, the mortgagee “shall produce for the mortgagor and mediator
documentation of its consideration of the options available. . .” 12 V.S.A. § 4633 (a)(2).
There is no basis for the Plaintiff to conclude that it did not have the obligation to provide
documentation of the identity of the investor as the USDA, or a copy of the federal
regulations upon which it relied to exclude cohabitant income that had been the basis of
the granting of the loan in the first place.

        This information was not provided until this Court held a hearing to determine
compliance with the mortgagee’s obligation under the statute. Even then, it was not
provided to Defendant’s counsel in document form. Plaintiff’s counsel simply made
representations and argument in support of its request for a determination of compliance,
but did not offer the documentation, and has still not disclosed the Plaintiff’s status or
interest in the loan.

        Plaintiff’s counsel argued that because there was something on the loan
application at the time Defendant applied about the loan being a rural development loan
that Defendant should have known that this was a USDA loan (and presumably therefore
subject to federal regulations which prohibit cohabitant income), but there is nothing in
the loan documents to that effect. Withholding at foreclosure mediation specific
information about the investor and documentation of investor prohibition against
including income that was originally included at the time of origination is thoroughly
inconsistent with the letter and spirit of the foreclosure mediation statute and the
obligations it imposes on mortgagees.

        The Court determines, pursuant to 12 V.S.A. § 4635, that Plaintiff has not
complied with its obligations, and that sanctions are warranted. 12 V.S.A. § 4635 (b).
Sanctions include prohibition against the collection of interest and any late fees for the
period from March 2, 2011 (the second day of mediation) to January 30, 2012 (the date of
hearing); Defendant’s attorneys’ fees for attending the mediation sessions and the hearing
on January 30, 2012; and denial of the equitable remedy of foreclosure in this case.




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        Therefore, Counts I and III of the complaint are dismissed with prejudice.
Plaintiff may pursue judgment on Count II, subject to set-off for the sanctions set forth in
the preceding paragraph. Nothing in this Order precludes Plaintiff from subsequently
pursuing foreclosure on any judgment that may be obtained in this case, but Plaintiff is
prohibited from collecting, in any subsequent foreclosure on such judgment, attorneys
fees attributable to this case to the extent they are not included in any judgment Plaintiff
may obtain in this case.

       Dated this 16th day of February, 2012.

                                                             ________________________
                                                               Hon. Mary Miles Teachout
                                                                         Superior Judge




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