RICHARD M. PLATKIN, J.

Hogan Lovells U.S. LLP, (David Dunn, Stacey A. Lara and Leah Jacob, of counsel), New York, Attorneys for Plaintiff.

The Legal Project (Michelle F. Lee, of counsel), Albany, Attorneys for Grady McMullin.

RICHARD M. PLATKIN, J.

This is an action to foreclose upon a residential mortgage. Plaintiff U.S. Bank National Association, as Trustee for SASCO Mortgage Loan Trust 2006–RF4 ("SASCO Trust"), moves for an order: (1) granting summary judgment against defendant Grady McMullin ("defendant"); (2) striking defendant's answer and dismissing the affirmative defenses and counterclaims alleged therein; (3) entering a default judgment against the remaining non-appearing and non-answering defendants; (4) reforming the mortgage to include the legal description of the property; (5) amending the caption to remove the "John Doe" defendants; and (6) appointing a referee to compute. Defendant opposes the motion and cross-moves for, among other things, summary judgment dismissing the complaint.

BACKGROUND

On June 24, 2003, defendant and non-appearing defendant Tiffany R. Coles executed a note in favor of Homestead Funding Corp. in the amount of $92,131, which was secured by a mortgage insured by the Federal Housing Administration ("FHA"), a division of the United States Department of Housing and Urban Development ("HUD"). Defendant and Coles defaulted on their repayment obligations and, in June 2006, entered into a loan modification agreement with Wells Fargo Home Mortgage, Inc. ("Wells Fargo"). The borrowers defaulted again by failing to make the payments due and owing on and after March 1, 2009. Plaintiff commenced this action in May 2012 to foreclose on the mortgage.

Defendant answered and alleged forty affirmative defenses and eleven counterclaims, including allegations of breach of contract, violations of various HUD regulations, and lack of standing. Settlement conferences were held before the Court on January 17, 2013, February 28, 2013, April 25, 2013 and June 6, 2013, with defendant represented by counsel at each such appearance. At the June 6, 2013 conference, the Court was advised that defendant was ineligible for a loan modification under the FHA Home Affordable Modification Program ("HAMP") and that non-HAMP options were unaffordable to defendant. At that point, both sides agreed that this case should be released from the settlement conference part, and the instant motion practice ensued.

ANALYSIS

A plaintiff in a mortgage foreclosure action establishes its prima facie entitlement to judgment as a matter of law by producing the mortgage, proof of the unpaid debt and evidence of the default (see Loancare v. Firshing, 130 A.D.3d 787, 14 N.Y.S.3d 410 [2d Dept.2015] ; Wells Fargo Bank, N.A. v. Erobobo, 127 A.D.3d 1176, 9 N.Y.S.3d 312 [2d Dept.2015], lv. dismissed 25 N.Y.3d 1221, 16 N.Y.S.3d 514, 37 N.E.3d 1158 [2015], appeal dismissed 26 N.Y.3d 1006, 20 N.Y.S.3d 546, 42 N.E.3d 216 [2015] ). Upon such a showing, the burden shifts to the defendant " ‘to demonstrate the existence of a triable issue of fact as to a bona fide defense to the action’ " (Cochran Inv. Co., Inc. v. Jackson, 38 A.D.3d 704, 705, 834 N.Y.S.2d 198 [2d Dept.2007], quoting Mahopac Natl. Bank v. Baisley, 244 A.D.2d 466, 467, 664 N.Y.S.2d 345 [2d Dept.1997], lv. dismissed 91 N.Y.2d 1003, 676 N.Y.S.2d 129, 698 N.E.2d 958 [1998] ).

In support of its motion, plaintiff submits, among other things, the note, mortgage, proof of assignments, the notices provided to defendant, and the relevant trust agreement. Plaintiff also submits the affidavit of Alissa Doepp, a vice president for loan documentation at Wells Fargo Bank, N.A., successor by merger of Wells Fargo, which establishes that the loan is in default. Doepp further avers that plaintiff has maintained physical possession of the note since April 2012, thereby establishing a basis for its standing to maintain this action separate and apart from plaintiff's status as an assignee.

The foregoing submissions establish plaintiff's prima facie entitlement to summary judgment, and the burden therefore shifts to defendant to raise a triable issue of fact with respect to his affirmative defenses and/or counterclaims. In opposition to the motion, defendant submits argument and evidence with respect to three issues: (1) plaintiff's standing to maintain this action; (2) plaintiff's alleged commencement of this action in breach of the mortgage and note and the covenant of good faith and fair dealing implicit therein; and (3) the equitable defense of unclean hands. Defendant first argues that plaintiff lacks standing to commence this action because the note and mortgage were transferred into the SASCO Trust in violation of the pooling service agreement and/or Estates, Powers and Trust Law § 7–2.4. This argument is without merit because defendant, "as a mortgagor whose loan [was] owned by a trust, does not have standing to challenge the plaintiff's possession or status as assignee of the note and mortgage based on purported noncompliance with certain provisions of the [service agreement]" (Wells Fargo Bank, N.A., 127 A.D.3d at 1178, 9 N.Y.S.3d 312 ; see Bank of N.Y. Mellon v. Gales, 116 A.D.3d 723, 725, 982 N.Y.S.2d 911 [2d Dept.2014] ; see also Rajamin v. Deutsche Bank Natl. Trust Co., 757 F.3d 79, 86–88 [2d Cir.2014] ). Defendant's unsupported speculation that the existence of a prior, discontinued foreclosure action against him suggests the existence of irregularities in the chain of title to his loan likewise fails to raise a triable issue of fact. Accordingly, defendant's affirmative defense alleging that plaintiff lacks standing to maintain this action must be rejected.

Defendant next contends that plaintiff commenced this action under circumstances not permitted by the HUD mortgage servicing regulations (24 C.F.R. Part 203 ["Part 203"] ), which is said to constitute a breach of the note and mortgage, as well as a failure on plaintiff's part to comply with a condition precedent to suit. Relatedly, defendant complains that plaintiff failed to properly consider his application for a loan modification under the HAMP regulations, thereby violating the covenant of good faith and fair dealing inherent in the loan documents.

With respect to Part 203, the mortgage provides as follows: "In many circumstances, regulations issued by [HUD] will limit [plaintiff's] rights, in the case of payment defaults, to require immediate payment in full and foreclosure if not paid. This [mortgage] does not authorize acceleration or foreclosure if not permitted by regulations of [HUD]" (§ 9[d] ).

The federal regulations at issue herein "identif[y] servicing practices of lending institutions that HUD considers acceptable for mortgages insured by HUD" (24 C.F.R. 203.500 ). The regulations also establish certain "pre-foreclosure" obligations on the part of a mortgagee:

Before initiating foreclosure, the mortgagee must ensure that all servicing requirements of [Part 203] have been met. The mortgagee may not commence foreclosure ... unless at least three full monthly installments due under the mortgage are unpaid after application of any partial payments that may have been accepted but not yet applied to the mortgage account. In addition, prior to initiating any action required by law to foreclose the mortgage, the mortgagee shall notify the mortgagor in a format prescribed by the [HUD] Secretary that the mortgagor is in default and the

mortgagee intends to foreclose.... (24 CFR 203.606 [a] ).

Among the pre-foreclosure obligations established by Part 203 is a face-to-face meeting: "The 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" (24 C.F.R. 203.604 [b]; see 24 C.F.R. 203.606 [a] ). Under the regulations,

[a] reasonable effort to arrange a face-to-face meeting with the mortgagor shall consist at a minimum of one letter sent to the mortgagor certified by the Postal Service as having been dispatched. Such a reasonable effort to arrange a face-to-face meeting shall also include at least one trip to see the mortgagor at the mortgaged property, unless the mortgaged property is more than 200 miles from the mortgagee, its servicer, or a branch office of either, or it is known that the mortgagor is not residing in the mortgaged property. (24 C.F.R. 203.604 [d] ).

According to defendant, plaintiff failed to "have a face-to-face interview with [him], or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage [were] unpaid", in violation of the regulations cited above. Plaintiff responds that its efforts over a multi-year period to negotiate a resolution of the issues raised by defendant's default more than satisfied its regulatory and contractual obligations. Plaintiff further maintains that it gave adequate and appropriate consideration to each of defendant's multiple requests for a loan modification.

The Court concludes that the proof adduced by plaintiff in support of the motion demonstrates that it made good-faith, reasonable efforts over a multi-year period to negotiate a consensual resolution of defendant's longstanding default before commencing this action. Among other things, plaintiff offered to meet with defendant regarding his default and sent him numerous letters offering him one-on-one assistance with his mortgage issues (Kruse Aff., Ex. 6). Plaintiff also considered multiple applications by defendant for a loan modification over a period of several years preceding the commencement of this foreclosure action, although these efforts ultimately did not culminate in a mutually agreeable resolution (id., Exs.1–5, 7).

Defendant's vague, conclusory and unsupported allegations in opposition—including the claim that plaintiff acted wrongfully in refusing to accept his offer of a lump-sum down payment of $50,000 in "late 2011" in connection with a prior foreclosure proceeding (McMullin Aff., ¶ 20–22)—are insufficient to raise a triable issue of fact as to plaintiff's good faith. There simply is no competent proof that plaintiff acted in a manner that had the effect of destroying or injuring defendant's rights under the loan documents and, in fact, the only competent record proof is to the contrary. Accordingly, the Court concludes that defendant's affirmative defense claiming breach of the implied covenant of good faith and fair dealing and the equitable defense of unclean hands are without merit. Despite the considerable efforts made by plaintiff over a multi-year period to address in good faith the issues raised by defendant's persistent failure to pay his mortgage, the HUD regulations cited by defendant did require plaintiff to "have a face-to-face interview with the [defendant], or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage [were] unpaid" (24 C.F.R. 203.604 [b] ), which shall include at least "one trip to see the mortgagor at the mortgaged property" (id. [d] ). Defendant argues that plaintiff's failure to prove that it strictly complied with this specific regulatory provision compels the denial of summary judgment and the dismissal of plaintiff's complaint.

The mortgage here "does not "authorize ... foreclosure if not permitted by regulations of [HUD]" (§ 9[d] ). In Green Planet Serv., LLC v. Martin, 141 A.D.3d 892, 34 N.Y.S.3d 911 (2016), the Appellate Division, Third Department, concluded that similar language within FHA loan documents established a condition precedent to suit (id. at 893, 34 N.Y.S.3d 911 ; see also HSBC Bank USA, N.A. v. Teed, 48 Misc.3d 194, 4 N.Y.S.3d 826 [Steuben County Court 2014] ). Thus, where the defendant's answer alleges non-compliance with such condition in accordance with the pleading requirement of CPLR 3015(a), the plaintiff-lender has the burden of demonstrating the occurrence of the condition as part of its prima facie case (Green Planet, 141 A.D.3d at 893, 34 N.Y.S.3d 911). In Green Planet, the Third Department held that the plaintiff-lender was not entitled to summary judgment because its moving papers were "wholly devoid of any proof, explanation or argument" regarding plaintiff's compliance with the face-to-face meeting requirement (id. ).

Given the binding force of Green Planet, the Court concludes that the loan documents here establish a condition precedent to suit, the occurrence of which plaintiff must establish as part of its prima facie case. The issue then becomes whether plaintiff has established the occurrence of the condition stated in the mortgage: that the HUD regulations did not prohibit the commencement of this action.

Plaintiff does not claim to have had a face-to-face meeting with defendant before he missed three full mortgage payments in strict compliance with 24 C.F.R. 203.604(a), and it has not submitted proof that it was excused from doing so because the property "is more than 200 miles from the mortgagee, its servicer, or a branch office of either" (id. [d] ). Rather, plaintiff argues that its loss mitigation efforts over the years constitute substantial compliance with its obligations under Part 203, including the face-to-face meeting requirement, and any lack of strict compliance should be excused.

In considering whether the commencement of this action was not permitted by the HUD regulations, the Court's starting point is the text of the regulations themselves. A clear prohibition against the commencement of a foreclosure action is found in the second sentence of 24 C.F.R. 203.606(a), which unqualifiedly declares that "[t]he mortgagee may not commence foreclosure for a monetary default unless at least three full monthly installments due under the mortgage are unpaid". By employing the " ‘unmistakable language of condition’ " through "the use of [a] term[ ] such as ... ‘unless' " (MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640, 645, 884 N.Y.S.2d 211, 912 N.E.2d 43 [2009], quoting Oppenheimer, 86 N.Y.2d at 691, 636 N.Y.S.2d 734, 660 N.E.2d 415 ), this portion of the regulation expressly prohibits a lender from commencing a foreclosure action before three payments are missed.

In contrast, the first sentence of 24 C.F.R. 203.606(a) imposes a more general duty on FHA lenders "to ensure" that all of the Part 203 servicing requirements, including the requirement of a face-to-face meeting, are met prior to foreclosure. This portion of the regulation is not cast in the form of a clear prohibition and, instead, employs the type of "doubtful language" that courts routinely interpret "as embodying a promise" or duty (Oppenheimer, 86 N.Y.2d at 690–691, 636 N.Y.S.2d 734, 660 N.E.2d 415 ). HUD has directed lenders to comply with their pre-foreclosure duties under Part 203 and expressed its intent that lenders so comply before proceeding to foreclosure (see 24 C.F.R. 203.500 ), but the federal agency has not gone so far as to clearly and affirmatively prohibit a lender from commencing a foreclosure action where there has not been full and literal compliance with each and every pre-foreclosure requirement set forth in Part 203.

A proper construction of the Part 203 regulations also is informed by the simple fact that it is impossible for the plaintiff here to ever come into strict compliance with 24 C.F.R. 203.604. The plain language of the regulation required plaintiff to comply with the face-to-face meeting requirement by May 1, 2009, "before three full monthly installments due on the mortgage [were] unpaid" (24 C.F.R. 203.604 [a] ). Almost eight years have passed since that deadline, and defendant has missed another 93 or so payments in the interim. No amount of subsequent loss-mitigation efforts can ever bring plaintiff into strict compliance with 24 C.F.R. 203.604(a), and the HUD regulations should not be construed to command an impossibility.

The highly inequitable consequences of reading 24 C.F.R. 203.606(a) as prohibiting a lender from commencing a foreclosure action where there has been any degree of non-compliance with Part 203 further counsels against defendant's position. If this action had been commenced before the borrower had missed three payments, in violation of the clear prohibition of the second sentence of 24 C.F.R. 203.606(a), the lender would be free to recommence suit after the third payment was missed. Similarly, if this case were dismissed based on the lender's failure to strictly comply with the conditions precedent established by Real Property Actions & Proceedings Law §§ 1303 and 1304, a new action could be commenced after the required notices were sent.

Here, in contrast, the lender's inability to come into strict compliance with 24 C.F.R. 203.604 means that the dismissal requested by defendant would effectively be one that is with prejudice to the commencement of a new action. This would work a substantial forfeiture upon plaintiff, based solely on its failure to have a face-to-face meeting with defendant prior to May 1, 2009. It seems inconceivable that the HUD regulations, promulgated in respect to the federal agency's role as an insurer of mortgages, were intended to create a permanent and impenetrable barrier to foreclosing on the property of a borrower who has not made a mortgage payment for more than eight years.

Moreover, reading the Part 203 regulations to prohibit foreclosure here would not further HUD's regulatory objectives in any meaningful way. Despite plaintiff's failure to arrange a face-to-face meeting with defendant before May 1,2009, the record is replete with proof of numerous meetings and other communications between the lender and the defendant-borrower (and/or his counsel) directed at resolving defendant's longstanding default. Over a nine-year period, both prior to and subsequent to the commencement of this action, plaintiff: (a) engaged in extensive loss mitigation efforts in connection with a prior foreclosure action, including participation in a settlement conference before the Court; (b) appeared at four in-person CPLR 3408 conferences over a six-month period in this action, a process that concluded only after both sides agreed that further settlement efforts would be futile; and (c) participated in an additional round of settlement negotiations following oral argument on the instant motions. All reasonable efforts to resolve defendant's default have been fully explored over a period of more than nine years, defendant has not been prejudiced by plaintiff's lack of strict compliance with 24 C.F.R. 203.604, and no legitimate purpose would be served by dismissing this action to allow for an additional "pre-foreclosure" loss-mitigation efforts.

Based upon the text, structure and purpose of the HUD regulations, the Court concludes that the first sentence of 24 C.F.R. 203.606(a), which encompasses the regulatory requirement of a face-to-face meeting before a borrower misses three payments, does not prohibit a lender from commencing a foreclosure action where, as here, the lender has substantially complied with the Part 203 regulations prior to commencement, strict compliance with the regulation no longer is possible, and additional loss-mitigation efforts would be futile.

Accordingly, under the particular facts and circumstances of this case, the Court concludes that plaintiff has demonstrated the occurrence of the condition specified in the mortgage—that the HUD regulations did not prohibit the commencement of this action—and defendant's opposition fails to raise a triable issue of fact regarding the same.

CONCLUSION

Accordingly, it is

ORDERED that plaintiff's motion for summary judgment is granted in its entirety; and it is further

ORDERED that defendant's cross motion is denied; and it is further

ORDERED that all of the affirmative defenses and counterclaims contained in defendant Grady McMullin's Answer are dismissed; and it is further

ORDERED that this action to foreclose a mortgage affecting premises known as 40 Mereline Avenue, Albany, New York 12209, be and is hereby referred to James E. Gross, 90 State Street, Suite 700, Albany, New York 12207, to ascertain and compute the amount due to plaintiff for principal and interest on the Note and Mortgage set forth in the Complaint for taxes, assessments, water rates, and/or fire insurance premiums, and late charges, to examine and report whether the premises should be sold in one parcel and that immediately upon the coming in of the report of said Referee, and without further notice, plaintiff may apply for the usual Judgment of Foreclosure and Sale, and for the relief demanded in the Complaint besides costs and extra allowances provided by law; and it is further

ORDERED that such Referee shall make the Referee's Report to this Court with all convenient speed; and it is further

ORDERED that by accepting this appointment the Referee certifies that (s)he is in compliance with Part 36 of the Rules of the Chief Judge (22 NYCRR Part 36), including but not limited to, section 36.2(c) and section 36.2(d); and it is further

ORDERED that, if required, the Referee appointed herein shall take testimony pursuant to RPAPL § 1321 ; and it is further

ORDERED that the subject Mortgage be reformed to include the legal description of the property as requested in the Complaint; and it is further

ORDERED that all "John Doe" defendants be deleted from the caption, and the caption so amended to reflect same; and it is further

ORDERED that the caption of this action shall be amended to read as follows:

US BANK NATIONAL ASSOCIATION, as Trustee for SASCO MORTGAGE LOAN TRUST 2006–FR4, Plaintiff,

against-

GRADY MCMULLIN, JR., a/k/a GRADY MCMULLIN; TIFFANY R. COLES; NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE;

ALBANY MEDICAL CENTER HOSPITAL; UNITED STATES OF AMERICA–DEPARTMENT OF THE TREASURY–INTERNAL REVENUE SERVICE, Defendants.

and it is further

ORDERED that a default judgment in favor of plaintiff as to all non-appearing and non-answering defendants shall be granted as to the claims described in the Complaint; and it is finally

ORDERED that a copy of this Decision and Order with Notice of Entry shall be served upon the owner of equity of redemption, any tenants named in this action and any other party entitled to such notice.

This constitutes the Decision and Order of the Court. The original of this Decision and Order is being transmitted to plaintiff's counsel; all other papers are being transmitted to the Albany County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.