Earlier this monthi the First DCA affirmed a final judgment of foreclosure entered in favor of Wells Fargo Bank (“the Bank”) in Hartz v. Wells Fargo Bank, N.A., 1D19-759, 2021 WL 1439732, at *1 (Fla. 1st DCA Apr. 16, 2021). In Hartz, the borrower, Matthew Hartz, fell behind in his mortgage payments so the Bank initiated foreclosure proceedings against him.ii The Department of Veterans Affairs guaranteed and insured Hartz’s mortgage. In response to the Bank’s foreclosure complaint, Hartz asserted in an amended pleadingiii that the Bank failed to comply with certain federal regulationsiv which applied to his VA insured loan and which constituted conditions precedent to foreclosure.
Although the court allowed Hartz to amend his pleading to assert this specific affirmative defense, the court instructed Hartz “that he bore the burden at trial to establish the VA regulations constituted conditions precedent [to foreclosure].” Despite carrying the burden on the issue, at trial Hartz failed to elaborate on the defense, instead he simply argued that the Bank “should have notified the department of Veteran Affairs” prior to foreclosing.v The DCA agreed with the trial court that “merely raising a defense that conditions precedent were not satisfied does not automatically shift the burden of proof to the Bank to show satisfaction.” The DCA explained that Hartz failed to establish the VA regulations were applicable to his loan.
The DCA elaborated Hartz was required to demonstrate that his loan specifically incorporated the VA regulations and made them a condition precedent to foreclosing. If that showing was made, then the Bank would carry the burden of demonstrating it complied with the pertinent provisions. The DCA affirmed the foreclosure judgment but noted that it was not “foreclosing the possibility that VA regulations may create conditions precedent to acceleration under a different record.”vi Ostensibly, had Hartz met his burden of proof by establishing the terms of his loan required compliance with the pertinent VA regulations, the Bank would have been required to prove it complied with those provisions.
i This opinion will not be final until May 4, 2021 provided Hartz does not move for rehearing prior to that date.
iii The trial court allowed Hartz to amend his affirmative defenses during the trial and continued the trial so Hartz’s defense could be considered on the merits.
iv The regulation at issue here was 38 C.F.R. §36.4346(g) (2006); however, the same regulation is now codified at 38 C.F.R. §36.4350(g) (2015). This regulation required the Bank to “…employ collection techniques which provide flexibility to adapt to the individual needs and circumstances of each borrower…” including, “at a minimum, written delinquency notice to the borrowers(s) [and] an effort to establish contact, among others.” Hartz, at *2.