FLORIDA COURT AFFIRMED | Key Points

1. Florida’s Second DCA recently affirmed a foreclosure judgment entered in favor of Wells Fargo Bank despite allegations that the Bank failed to comply with conditions precedent by failing to conduct a face-to-face meeting as required by 24 C.F.R. § 203.604 prior to initiating foreclosure. Kuhnsman v. Wells Fargo Bank, N.A., 45 Fla. L. Weekly D2449 (Fla. 2d DCA Oct. 30, 2020). In Kuhnsman, the Borrowers took out a loan in 2007 and stopped making mortgage payments in 2010. The parties engaged in loss mitigation discussions which came to an unsuccessful end in August 2014. In September 2014 the Bank sent a certified letter requesting a face-to-face meeting with the Kuhnsmans as required by § 203.604. The letter was returned to the Bank bearing a “Refused” stamp on the envelope. That refusal was followed by a cease and desist letter authored by the Kuhnsmans’ attorney requiring all communications to go through counsel. The Bank attempted loss mitigation efforts with counsel but they failed so the Bank initiated foreclosure.

2. The matter proceeded to trial where the Kuhnsmans argued the Bank failed to comply with the face-to-face meeting requirement of § 203.604. Wells Fargo argued the “refused” certified letter and the Bank’s communications with the Kuhnsmans’ counsel amounted to substantial compliance with § 203.6o4. The Second DCA agreed explaining that the Bank followed the Kuhnsmans’ cease and desist demand: “[T]he bank never visited the property or met with the Kuhnsmans… [instead] Wells Fargo pursued loss mitigation efforts, albeit unsuccessfully, with their counsel.” The Court elaborated that requiring a face-to-face meeting under these circumstances “would elevate form over substance.” Lastly, the Court concluded even if Wells Fargo’s efforts at substantial compliance fell short, [it] would still affirm” because the Kuhnsmans could not prove they were prejudiced by any breach of the pre-suit face-to-face meeting requirement given the failed settlement negotiations with counsel.

3. This opinion provides a very helpful and commonsensical approach to evaluating compliance with conditions precedent as it pertains to the face-to-face meeting requirement of HUD. The Court’s application of the substantial rather than strict compliance standard will prove helpful in overcoming defenses based on non-compliance with conditions precedent as long as the lender puts forth a good faith effort to comply with the relevant statutory and contractual provisions required by the mortgage.