Opinion
No. 1032 C.D. 2013
01-29-2014
Jonathan D. Christman and Jill Christman, Petitioners v. Pennsylvania Housing Finance Agency, Respondent
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE McCULLOUGH
Jonathan D. Christman and Jill Christman (Petitioners) petition for review of the May 20, 2013 decision of the Pennsylvania Housing Finance Agency (Agency) denying their application for emergency mortgage assistance under the act known as the Homeowner's Emergency Mortgage Assistance Loan Program (HEMAP or Act 91). We affirm.
Act of December 3, 1959, P.L. 1688, added by the Act of December 23, 1983, P.L. 385, as amended, 35 P.S. §§1680.401c-1680.410c. The purpose of Act 91 is "to establish a program which will through emergency mortgage payments prevent widespread mortgage foreclosures . . . which result from default caused by circumstances beyond a homeowner's control." Crawl v. Pennsylvania Housing Finance Agency, 511 A.2d 924, 927 (Pa. Cmwlth. 1986).
Petitioners own a residence and real property located at 1939 East 10th Street, in the City of Allentown, Lehigh County, which Jill Christman's father conveyed to them in 2007. In November 2009, Petitioners entered into a refinance program and agreement with Ocwen Loan Servicing (Lender), effective January 2010; pursuant to the agreement, the mortgage on the property was approximately $80,000, spanning over a 30 year term, at payment rate of $464.01 per month and an interest rate of 5.06%. On January 3, 2013, Petitioners received an Act 91 notice advising them that the mortgage on their property was in default and that Lender intended to foreclose. (Reproduced Record (R.R.) at 17a-22a.) Petitioners thereafter submitted a HEMAP loan application to the Agency. On March 25, 2013, the Agency denied Petitioners' application, concluding that their alleged financial hardship, i.e., an increased monthly mortgage rate due to Lender's failure to pay real estate taxes, was not due to circumstances beyond their control.
Notably, the original mortgage instrument was not adduced as evidence at the hearing; nor is it included in the certified record or reproduced record.
The purpose of an Act 91 notice is to instruct the mortgagor of different means he may use to resolve his arrearages in order to avoid foreclosure on his property, and it also gives him a timetable in which such means must be accomplished. Section 403-C of Act 91, 35 P.S. §1680.403c. Specifically, the Act 91 notice informs the mortgagor of the availability of financial assistance through HEMAP. 35 P.S. §1680.403c(b)(1). Act 91 further states that if the mortgagor and mortgagee reach an agreement and thereafter the mortgagor is again unable to make payment, "[t]he mortgagee shall not be required to send any additional notice pursuant to this article." 35 P.S. §1680.403c(d).
Petitioners appealed. After a hearing, the Agency Examiner (Examiner) issued a decision on May 20, 2013, affirming the initial Agency determination. The Examiner found the following relevant facts.
In 2010, Jill Christman was terminated from her employment with Walgreens because she failed to attend work. She filed a claim against Walgreens under the Family and Medical Leave Act, 29 U.S.C. §§2601-2654, and received $15,000 as a result of that claim. Jill Christman suffers from herniated nucleus pulposus of her lumbar spine with radiculopathy and experiences significant pain. She applied for Social Security benefits in 2012, but was denied benefits on the ground that her treating physician did not provide specific information concerning her medical condition. Petitioner Jill Christman is appealing the decision and expects to receive between $800 to $900 a month if benefits are approved. (Examiner's decision at 2-3.)
Jonathan Christman was employed with Walgreens until September 2010, when he was laid off from his job. He received unemployment compensation benefits until March 2012, and on May 2, 2013, he began a temporary assignment with a staffing agency. Petitioners' daughter and her four children plan to move in with Petitioners. Petitioners anticipate that their daughter will pay $500 a month in rent. On an annual basis, the school real estate taxes for the property are approximately $2,000, the county taxes $500, and the city taxes $702 -- the total being $3,202 per annum. Id. at 3.
Petitioners testified that they did not have a tax escrow account at any time prior to the refinancing program and agreement with Lender. When taxes on the property remained unpaid over the course of a few years, the municipality retained a law firm to collect the debt, and the law firm sent Petitioners a letter dated June 1, 2012. This letter lists Petitioners' outstanding delinquent taxes from 2007 to 2011 as totaling $17,672.13. A breakdown is as follows: $2,358.88 for 2007 school taxes; $2,015.18 for 2008 school taxes; $4,331.98 for 2009 city taxes; $2,627.72 for 2009 school taxes; $1,283.83 for 2010 city taxes; $2,150.22 for 2010 school taxes; $812.37 for 2011 city taxes; and $2,096.98 for 2011 school taxes. Id. at 2.
Lender eventually paid the outstanding tax debt in full and then increased Petitioners' mortgage payment from $464 per month to $1,929 per month, until such time as it recovered the funds it paid for the taxes. Petitioners could not make payments at the increased mortgage rate. On November 15, 2012, Petitioners filed a civil complaint against Lender, alleging that Lender created a tax escrow plan, from which Petitioners' real estate taxes were to be paid, but failed to keep proper records and lost track of the escrow monies. Petitioners' attorney informed the Agency that if Petitioners obtained any money from the lawsuit, they would apply the funds toward a HEMAP loan. Id. at 2-3.
At the telephonic hearing, Petitioners testified that they personally paid real estate taxes from 2007 to 2009 when they entered into the refinance program and agreement with Lender. (Supplemental Record (S.R.) at 25b.) Petitioners stated that based upon telephone conversations with Lender, they believed that their monthly mortgage of $464 included an escrow account that would cover their taxes and other expenses, except homeowners' insurance. Id. at 25b, 27b. However, Petitioners admitted that they never received a yearly notification informing them whether the escrow account would be increased. Id. at 25b. Through their attorney, Petitioners also stated that the law firm's involvement in the collection of the taxes, and Pennsylvania's statutory scheme in this area of the law, resulted in a dramatic increase in the total amount of taxes owed because the law firm's fees were included in the overall tax debt. Id. at 25b, 30b, 40b.
The refinance offer/agreement between Lender and Petitioners reads: "You have been selected to receive a special 'STREAMLINED LOAN MODIFICATION' that will lower your mortgage payment. In fact, your new monthly payment will be only $464.01 per month, including your taxes and insurance if your account was previously escrowed." Id. at 57b. However, Petitioners testified that their mortgage account was not previously escrowed. Id. at 27b-28b. Finally, Petitioners added that they can "handle" their normal monthly mortgage rate, but are unable to pay the accelerated monthly payment of $1,929 to cover the taxes that Lender paid. Id. at 41b.
By decision dated May 20, 2013, the Examiner denied the appeal, reasoning as follows:
According to [Petitioners], the real estate taxes were not escrowed prior to the loan modification or "refinancing program" in December 2009 but the taxes were escrowed after the modification. However, the document issued by [Lender] on November 13, 2009, does not state that an escrow account for taxes would be instituted. The document states, "your new payment will be only $464.01 per month, including your taxes and insurance if your account was previously escrowed." [emphasis in original.] According to [Petitioners'] testimony, the account was not escrowed previously. In addition, with a mortgage of $79,673 at 5.06%, with a 30 year term, a payment of $464.01 could not possibly allow for sufficient escrow for real estate taxes totaling $3,302. The monthly escrow amount needed to cover taxes totaling $3,302 is $267.
It is reasonable to assume that [Petitioners] received numerous notices from 2007 through 2012 regarding the delinquent taxes. If [Petitioners] believed their taxes were escrowed, they would have contacted [Lender] immediately upon receiving the first tax delinquency notice. . . . Normally, in any mortgage document, the lender clearly states that if the real estate taxes are not paid in a timely manner, the lender has the right to pay the taxes to avoid a sale of the property, the lender's collateral. The lender will pay the taxes using their own funds when there is no escrow account but then increase the monthly mortgage payment to recover those funds within a short period of time. Clearly, that was the circumstance [in this case]. [Petitioners] had no escrow account to pay the real estate taxes and
[Petitioners] failed to pay the real estate taxes in a timely manner. In this context, the mortgage assistance loan was properly denied on the basis [that] [Petitioners] are not suffering financial hardship due to circumstances beyond [their] control. . . .Id. at 3-4.
On appeal, Petitioners contend that the Examiner's statement that "it is reasonable to assume that [Petitioners] received numerous notices from 2007 through 2012 regarding the delinquent taxes" is not supported by substantial evidence. However, Petitioners admit in their brief that they received the tax bills. (Petitioners' brief at 6.) This Court has held that "[a] party's statements in its brief . . . are treated as a judicial admission." Bartholomew v. State Ethics Commission, 795 A.2d 1073, 1078 (Pa. Cmwlth. 2002) (citation omitted). Judicial admissions are formal concessions "which have the effect of withdrawing a fact from issue and dispensing it without the need for proof of the fact." Id. Therefore, even if the Examiner's statement was not supported by substantial evidence, Petitioners' concession in their brief renders any error in this regard harmless because the admission conclusively establishes that Petitioners received the tax bills.
Our review of the Agency's denial of an application for a HEMAP loan is limited to determining whether substantial evidence supports the Agency's findings of fact or whether the Agency committed an error or law or violated the applicant's constitutional rights. Fish v. Pennsylvania Housing Finance Agency, 931 A.2d 764, 767 n.3 (Pa. Cmwlth. 2007).
"Substantial evidence has been defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Cullins v. Pennsylvania Housing Finance Agency, 623 A.2d 951, 953 (Pa. Cmwlth. 1993).
Next, Petitioners argue that when they received the tax bills, the bills "were sent to [Lender] and [Lender] never returned them nor told [Petitioners] that they needed money for the tax escrow." (Petitioners' brief at 6.) Our review of the record reveals that this assertion was not made during the hearing and it otherwise has no basis in the record. "We cannot on appeal consider evidence that was not presented below." Adamski v. Unemployment Compensation Board of Review, 441 A.2d 502, 504 n.1 (Pa. Cmwlth. 1982).
Petitioners further assert that their testimony demonstrates that they reasonably believed that under the refinancing program and agreement, Lender would create a tax escrow account, from which taxes would be taken out of their monthly mortgage payment of $464. Petitioners maintain that the increase in their mortgage payment to $1,929 constituted a circumstance beyond their control.
In relevant part, section 404-C(a) of Act 91 provides:
No assistance may be made with respect to a mortgage or mortgagor under this article unless all of the following are established:35 P.S. §1608.404c(a)(4) (emphasis added).
* * *
(4) The mortgagor is a permanent resident of this Commonwealth and is suffering financial hardship due to circumstances beyond the mortgagor's control which render the mortgagor unable to correct the delinquency or delinquencies within a reasonable time and make full mortgage payments.
Act 91 does not define the phrase "circumstances beyond the mortgagor's control." However, the legislature delegated authority to the Agency to establish appropriate rules, standards, and regulations to implement Act 91 and HEMAP loans. Anela v. Pennsylvania Housing Finance Agency, 547 Pa. 425, 128, 690 A.2d 1157, 1159 (1997). The Agency's interpretation of Act 91 is entitled to great weight and may only be overturned if it is clearly erroneous. Id. According to the Agency's regulations, an example of a circumstance beyond the mortgagor's control includes the situation where: (1) the mortgagor, in fact, has an escrow account; and (2) there are "[u]nanticipated increases in payments to a mortgage escrow account to compensate for past underestimates of escrow requirements by the mortgagee [i.e., the lender]." 12 Pa. Code §31.205(b)(4).
Our Supreme Court has described the concept of a tax escrow account as follows:
In the 1930's [sic] substantial numbers of foreclosures were caused by inability to pay annual assessments. As a result of this, banks began requiring the monthly tax payments. The theory was that individual homeowners, especially small borrowers, would find it easier to make monthly payments of one-twelfth the yearly taxes, than to meet in a single payment the annual bill. The practice has continued ever since. . . .Buchanan v. Brentwood Federal Savings & Loan Association, 457 Pa. 135, 140-41, 320 A. 2d 117, 121 (1974).
There are basically two methods used to handle the monthly tax payments. Payments are either held in what are known as real estate and insurance escrow accounts or they are capitalized. The escrow system envisions that the bank establish individual records, credit an account upon receipt of the monthly payment, and debit it when the bank pays taxes to the appropriate authority.
Quoting federal regulations defining an "escrow account," the Superior Court has stated:
Escrow account means any account that a servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums (including flood insurance), or other charges with respect to a . . . mortgage loan, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay. The definition encompasses any account established for this
purpose, including a "trust account," "reserve account," "impound account," or other term in different localities. An "escrow account" includes any arrangement where the servicer adds a portion of the borrower's payments to principal and subsequently deducts from principal the disbursements for escrow account items. . . . [T]he term "escrow account" excludes any account that is under the borrower's total control.Dahl v. AmeriQuest Mortgage Company, 954 A.2d 588, 597 (Pa. Super. 2008) (quoting 24 C.F.R. §3500.17(b)).
As fact finder, the hearing examiner has complete authority over questions of witness credibility and evidentiary weight. Williams v. Workers' Compensation Appeal Board (USX Corp.-Fairless Works), 862 A.2d 137, 143 (Pa. Cmwlth. 2004); see Coyne v. Pennsylvania Housing Finance Agency, 826 A.2d 925, 929-30 & n.13 (Pa. Cmwlth. 2003) (discussing examiner's role as fact finder in Act 91 cases). For purposes of appellate review, it is irrelevant whether there is evidence to support contrary findings; if substantial evidence supports the examiner's necessary findings, those findings will not be disturbed on appeal. USX Corp.-Fairless Works, 862 A.2d at 143.
Here, the Examiner obviously rejected any proffer of evidence by Petitioners that they believed that a tax escrow account was created when they entered into the refinancing program and agreement in favor of other evidence. Specifically, the Examiner found, as a matter of fact, that Petitioners could not reasonably have believed that the refinancing agreement provided for a tax escrow account and that a tax escrow account was never created. These findings, in turn, are supported by substantial evidence, namely the inability of a monthly payment of $464 to cover the underlying mortgage plus an escrow for real estate taxes, and the fact that Petitioners stated that they did not have an account that was previously escrowed, which is a requirement under the refinancing agreement for obtaining a tax escrow account. (S.R. at 25b, 27-28b, 30b, 57b.)
Finally, in the statement of the case section of their brief, Petitioners cite a document reflecting their mortgage history payments and suggest that it conclusively establishes that Lender paid their taxes out of an escrow account. However, the entries in this document show that before (and even after) Petitioners' refinancing arrangement, no portion of Petitioners' routine, monthly mortgage payments were segregated and applied into a separate escrow account or as a credit in the "Escrow Balance" column. (Reproduced Record (R.R.) at 24a-31a.) See Buchanan, 457 Pa. at 140-41, 320 A.2d at 121 ("The escrow system envisions that the bank establish individual records, credit an account upon receipt of the monthly payment, and debit it when the bank pays taxes to the appropriate authority."). Indeed, at no time does the document reflect a surplus in the "Escrow Balance" column, which strongly suggests that Petitioners did not have an escrow account that accumulated funds on a monthly basis in order to pay annual real estate taxes. Given this record, we cannot conclude that the Examiner abused his discretion in weighing the evidence as fact finder and determining that Petitioners did not have and could not have reasonably believed that they did have a tax escrow account.
Although Lender made real estate tax disbursements in June 2009, reflecting a deficit in the "Escrow Balance," (R.R. at 26a, 29a), this is consistent with the notion that Lender took it upon itself to pay these taxes for Petitioners. None of Petitioners' subsequent monthly mortgage payments were applied to the deficit in the "Escrow Balance" prior to the refinancing agreement, and when the refinancing agreement became effective, Petitioners experienced a comparable increase in the total amount due on the mortgage's principle. Id. at 31a. As the Examiner noted, lenders typically pay outstanding delinquent taxes to avoid foreclosure on their collateral, and the negative "Advance Escrow" balance in Petitioners' monthly statement of approximately $16,000 following Lenders' payments to the municipalities further supports the conclusion that when Lender pays for tax delinquencies itself, these payments will show up as a lump-sum deficit in the "Escrow Balance" column. (S.R. at 28b-29b; R.R. at 32a.)
In this case, Petitioners did not adduce any evidence that they could not pay their taxes when they were due and owing and only claim that they could not pay the increased mortgage rate that occurred as a result of Lender satisfying the outstanding balance of the delinquent taxes. (S.R. 30b, 41b.) See Examiner's decision at 3 ("The real estate taxes were delinquent from 2007, 3 years prior to the circumstances involving the [Petitioners'] job losses."). Because Petitioners have an obligation to pay their real estate taxes in a timely fashion, and they did not have and could not have reasonably believed that there was a tax escrow account, we conclude that the Examiner did not err in determining that Petitioners' inflated mortgage rate was not a circumstance beyond their control. Cf. 12 Pa. Code. §31.205(b)(4) (listing, as a circumstance beyond control, the situation where the mortgagee has an escrow account and the lender errs in estimating the expenses needed to maintain the account).
Petitioners also argue that a substantial part of the blame should be placed on the municipality because the total amount of taxes owing were increased significantly due to the fact that the municipality hired a law firm to perform collection efforts. However, in light of the Examiner's findings that Petitioners did not have an escrow account, the legal fees accompanying collection efforts are a foreseeable consequence of Petitioners' failure to pay their real estate taxes. See Pentlong Corp. v. GLS Capital, Inc., 72 A.3d 818, 820 (Pa. Cmwlth. 2013) ("[T]he General Assembly amended the Municipal Claims and Tax Liens Act [Act of May 16, 1923, P.L. 207, as amended, 53 P.S. §[§]7101-7505] in 2003 to authorize municipalities to collect reasonable attorneys' fees from delinquent taxpayers.").
Accordingly, we affirm.
/s/_________
PATRICIA A. McCULLOUGH, Judge ORDER
AND NOW, this 29th day of January, 2014, the May 20, 2013 order of the Pennsylvania Housing Finance Agency is affirmed.
/s/_________
PATRICIA A. McCULLOUGH, Judge