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Nationstar v. Tsipouras

Court of Chancery of Delaware

November 14, 2018


          Draft Report: May 18, 2018

          Submitted Date: May 11, 2018

          Daniel T. Conway, Esquire

         Dear Counsel and Mr. Tsipouras:

         Pending before me is a foreclosure action on an equitable home equity conversion, or reverse, mortgage. Plaintiff's motion for default judgment is denied. Following an evidentiary hearing, I recommend the Court grant judgment in favor of the plaintiff in this in rem foreclosure action. This is a final report.

         I. Background

         On May 14, 2009, Defendant Alexander Tsipouras ("Tsipouras" or "Borrower"), mortgagor, executed loan documents, including the equitable home equity conversion, or reverse, mortgage (the "Mortgage"), which was not under seal, the note on the reverse mortgage loan (the "Note"), and the loan agreement, with MetLife Home Loans ("MetLife"), mortgagee, on his property at 595 Gravesend Road, Smyrna, Delaware (the "Property"). Because the Mortgage was a reverse mortgage, a second mortgage was executed between Tsipouras and the Secretary of Housing and Urban Development ("HUD").[1] The Mortgage and the HUD mortgage were recorded on November 2, 2009, re-recorded on September 20, 2010 to correct the legal description of the property, and recorded for a third time on August 3, 2011.[2]

         Plaintiff Nationstar Mortgage LLC dba Champion Mortgage Company[3] filed a complaint against Tsipouras in this Court on December 19, 2014 seeking foreclosure on the Mortgage. After receiving an extension, Tsipouras filed an answer on June 26, 2015. Master Ayvazian ordered this litigation stayed on July 29, 2015, pending resolution of a related Superior Court action in which the Plaintiff sought to strike an errant satisfaction of the Mortgage in order to clear the title of the property. Superior Court resolved that matter on December 1, 2015, concluding that the Mortgage was satisfied in error, and ordered that the satisfaction be stricken and the Mortgage reinstated.[4]

         Plaintiff Nationstar HECM Acquisition Trust 2015-1, Wilmington Savings Funds Society, FSB not Individually, but solely as Trustee ("Nationstar") filed a motion for default judgment in this case on October 12, 2016. The hearing on the motion was scheduled for December 16, 2016, and rescheduled to April 5, 2017, at Tsipouras' request for medical reasons. At the April 5, 2017 hearing, both parties appeared and Master Ayvazian requested supplemental briefing related to the chain of title on the property. After Master Ayvazian retired that summer, this case was reassigned to me. A status hearing on this case was scheduled and both parties appeared at the November 9, 2017 hearing. The chain of title issue was addressed at that hearing.[5] But questions remained concerning the terms of the loan agreement and an evidentiary hearing on the matter was held on March 16, 2018. Following that hearing, I reopened the record to allow the parties to submit additional information, and issued a draft report on May 18, 2018. Tsipouras filed exceptions on May 29, 2018, which were briefed. After consideration, I find the exceptions either largely repeat arguments made previously which are adequately addressed in the report, or address matters outside of the scope of this action.[6] I adopt the draft report, with minor changes.

         II. Analysis

         Plaintiff's motion for default judgment is denied. The standard for entry of a default judgment is contained in Court of Chancery Rule 55(b), which provides "[w]hen a party against whom a judgment for affirmative relief is sought, has failed to appear, plead or otherwise defend as provided by these Rules, and that fact is made to appear, judgment by default may be entered. . ." Further, Rule 55(b) is permissive, not mandatory, giving the court the discretion to decide whether to impose the "extreme remedy" of entering a default judgment.[7] The grounds for entering a default judgment are not present in this case. Tsipouras has appeared at the court hearings in this case and otherwise responded, presenting his defense from his perspective. Although his submissions have been informal, I have discretion to allow a degree of leniency, since Tsipouras is pro se.[8] I conclude the entry of a default judgment would not be appropriate in this case.

         The remaining issue is whether Nationstar is entitled to a judgment against Tsipouras in this foreclosure action. As plaintiff, Nationstar bears the burden of proof in this case and, to prevail on its claim seeking foreclosure against Tsipouras, must show by a preponderance of the evidence that it is entitled to relief.[9] I find Nationstar has met its burden in establishing that the Mortgage is valid and enforceable and that Tsipouras has defaulted on the Note through his nonpayment of taxes and insurance on the Property since 2009. Nationstar is entitled to judgment in its favor on this foreclosure action.

         The mortgage at issue is a home equity conversion, or reverse, mortgage. Reverse mortgages are designed to allow older homeowners to borrow money against the accumulated equity in their homes. Unlike traditional mortgages, borrowers in a reverse mortgage receive periodic payments or a lump sum pay out, and do not need to "repay the outstanding loan balance until certain triggering events occur."[10] The triggering event in a reverse mortgage generally involves the death of the borrower or the sale of the home, but the note and mortgage can create a triggering event, as they did in this case, when the borrower fails to perform a contractual obligation under the note and mortgage. Under the terms of the loan documents, Tsipouras, the Borrower, is obligated to pay all property charges, including taxes and the cost of insurance on the improvements on the Property.[11]The Mortgage and Note provide that the Borrower's nonperformance of an obligation under the Mortgage (such as the failure to pay the property charges) allows the Lender, after giving notice to Tsipouras and offering him an opportunity to cure the default and with the approval of an authorized HUD representative to accelerate the debt, to require immediate payment of all outstanding principal and accrued interest on the loan.[12]

         Nationstar argues that the Mortgage is valid and enforceable between the parties, absent a seal, and seeks to foreclose on the Property because of Tsipouras' nonpayment of the taxes and insurance on the property since 2009, in violation of the Mortgage and Note. Tsipouras argues that Nationstar wrongfully paid almost all of the loan proceeds to Shallcross Mortgage Company to pay off a pre-existing mortgage loan, when he thought the monies would be paid directly to him. He has asked repeatedly "where is my money?" throughout this process. And, in an April 4, 2017, letter to the Court, he asserted that he expected to receive approximately $265, 000 in cash from the reverse mortgage.[13] Tsipouras argues that he received only a small amount of cash from loan proceeds several months after the reverse mortgage loan was executed, he has not paid property taxes because he was being overcharged for his taxes, and he "does not want insurance on his property."[14]Further, he stated that he "does not know the limitations and requirements of his mortgage" ...

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