United States District Court, D. Colorado
BENJAMIN S. CARSON, Secretary of Housing and Urban Development, Plaintiff,
ESTATE OF VERNA MAE GOLZ and WILLIAM J. GOLZ, Defendants.
RECOMMENDATION OF UNITED STATES MAGISTRATE
MICHAEL E. HEGARTY, UNITED STATES MAGISTRATE JUDGE.
Mae Golz took out a reverse mortgage that was secured by her
property in Nederland, Colorado. Ms. Golz's loan became
due and payable upon her death, but it was not paid off by
her estate, family members, or other heirs. Accordingly, the
sole lienholder, Plaintiff Benjamin S. Carson, Secretary of
Housing and Urban Development (“HUD”), initiated
this foreclosure action, alleging an unpaid loan balance of
$288, 260.83. Although Plaintiff sued a number of Defendants,
only two remain after entry of default judgments: (1) Ms.
Golz's son, Dr. William J. Golz, who represents that he
is the personal representative of the Estate and Ms.
Golz's sole heir; and (2) the Estate (collectively,
their Amended Answer, Defendants allege that the failure to
pay off the loan stemmed from HUD's own failure to
schedule a timely appraisal, which was necessary because the
appraisal performed at the time of the loan's origination
did not account for material construction defects that were
obscured by snow; had that appraisal been performed as
required, Defendants would have satisfied the debt by paying
an appropriate percentage of the revised valuation.
Defendants also assert the following affirmative defenses:
(1) the foreclosure is avoidable and contrary to Regulations
of the National Housing Act (“NHA”) and the
Federal Housing Administration (“FHA”); (2)
Plaintiff fails to state a claim; (3) estoppel; (4) laches;
(5) waiver; (6) Plaintiff's final agency action is
arbitrary, capricious, and contrary to law; and (7) unclean
hands. Am. Answer ¶¶ 132-41, ECF No. 64. The stated
goal of these affirmative defenses is to preclude HUD from
capitalizing on its own neglect and misdeeds through a grant
has filed a Motion to Strike Defendants' Affirmative
Defenses to Plaintiff's Foreclosure Claim, which contends
that none of these affirmative defenses are “legally
valid.” Mot. to Strike at 3, ECF No. 71. Plaintiff
argues that some of the affirmative defenses are no more than
boilerplate recitals that do not provide adequate notice as
to their grounds, whereas others cannot succeed because they
are legally insufficient. Id. at 3. For the reasons
that follow, I respectfully recommend that the motion be
granted in its entirety.
Verna Mae Golz was seventy-five years old, mounting expenses
led her to seek a reverse mortgage. Am. Answer ¶ 73. On
January 18, 2002, she entered into a federally insured Home
Equity Conversion Mortgage (“HECM”) loan with a
private lender named Financial Freedom Senior Funding Corp.
(“Financial Freedom”). Am. Compl. ¶¶ 2,
29, ECF No. 31; see also ECF No. 31-1 (loan
agreement); ECF No. 31-2 (promissory note with Financial
Freedom); ECF No. 31-4 (deed of trust listing Financial
Freedom as beneficiary). After issuing the loan, Financial
Freedom assigned its deed of trust to Mortgage Electronic
Registration Systems, Inc. (“MERS”). Am. Compl.
¶ 37; see also ECF No. 31-6 (assignment to
MERS). The assignment was duly recorded with the Boulder
County Clerk. Am. Compl. ¶ 37.
loan, which is commonly referred to as a “reverse
mortgage, ” allowed Ms. Golz to convert the equity in
her home into cash by providing her with periodic advance
payments. Id. ¶¶ 19-20. The mortgage
holder's only recourse for this type of loan is to
foreclose on the property, as opposed to the borrower's
other assets. Id. ¶¶ 21-22. Here, the loan
was secured by real property in Nederland, Colorado.
Id. ¶ 1. The home on that property was
constructed back in 1963. Am. Answer ¶ 72. To alleviate
the risk of nonpayment, Financial Freedom obtained mortgage
insurance from HUD. Am. Compl. ¶¶ 27, 36. Pursuant
to that transaction, Ms. Golz executed a second promissory
note with HUD and provided HUD with its own deed of trust.
Id. ¶¶ 30-32; see also ECF No.
31-3 (promissory note with HUD); ECF No. 31-5 (deed of trust
listing HUD as beneficiary). There was some initial confusion
because the lender mistakenly encumbered a different lot
known as “Lot 2"; that error was not corrected in
full until 2011. Am. Answer ¶¶ 76-79.
executing the loan, Ms. Golz received loan advances for
years. Am. Compl. ¶¶ 38-40. By the end of 2011, she
had accrued a loan balance of over $241, 080. Id.
¶ 40. At that time, Financial Freedom submitted an
insurance claim based on the size of the loan balance and
assigned its rights and interests under the mortgage to HUD
in exchange for payment of $242, 013.06 on the claim in
December 2011. Id. ¶¶ 42-43. Likewise,
MERS assigned its deed of trust to HUD. Id. ¶
43; see also ECF No. 31-7 (assignment to HUD). Here,
too, the assignment was duly recorded with the Boulder County
Clerk. Am. Compl. ¶ 43. HUD currently holds both
promissory notes and deeds of trust. Id. ¶ 44.
Golz did not repay any of the loan balance after the
assignment; meanwhile, interest and fees continued to accrue.
Id. ¶ 45. The notes and deeds specify that the
loan balance is in default, and thus becomes immediately due
and payable, upon Ms. Golz's death. Id. ¶
47 (listing specific provisions). She passed away on May 16,
2014. Id. ¶ 48. The notes and deeds also state
that the loan is in default, and immediately due and payable,
if Ms. Golz ceases to principally reside on the property.
Id. ¶ 49 (listing specific provisions).
Plaintiff alleges the latter event occurred when Ms. Golz
became a domiciliary of Maricopa County, Arizona-the county
where Dr. Golz later filed a probate action on September 11,
2014. Id. ¶ 50; see also ECF No. 31-8
(application for probate).
parties present differing accounts as to what happened
regarding the debt after Ms. Golz's death. Plaintiff
alleges it advised the Estate that the loan was fully due and
payable and tried to recover the balance owed without
proceeding to foreclosure. Am. Compl. ¶¶ 53-54.
According to Plaintiff, the loan servicer notified the Estate
that HUD might consider accepting a deed in lieu of
foreclosure or a short sale for ninety-five percent of the
appraised value of the property under certain conditions,
which were never satisfied. Id. ¶ 56. Plaintiff
also alleges that Dr. Golz requested an appraisal on behalf
of the Estate but did not cooperate in getting it scheduled,
such that HUD was unable to procure an appraisal despite
numerous attempts. Id. ¶¶ 58-62. Plaintiff
further alleges that it sent notice to Dr. Golz on May 18,
2015, informing him that HUD was referring the loan for
foreclosure. Id. ¶ 63. Plaintiff states that
the amount owing, due, and payable under the note was $288,
260.83 as of August 18, 2017, with interest and fees
continuing to accrue until entry of judgment. Id.
contrast, Defendants allege that Dr. Golz was the one pushing
for a prompt appraisal. They were eager for an appraisal
because the one performed on November 30, 2001 (shortly
before the loan's origination) is inaccurate because it
does not account for two material construction defects that
were obscured by snow at the time of inspection. Am. Answer
¶¶ 72-73, 77, 79. Those defects are (1) a hand-dug
well, which ran dry after a historic drought in 2004, leaving
the site with no potable water; and (2) a lodgepole
foundation for the entryway that rests on the ground.
Id. Had the appraiser noticed the defects,
Defendants contend, the appraisal would have been “as
repaired” or the loan would have been conditioned on
repairing these defects (i.e., digging a deep well and
rebuilding the lodgepole foundation) per a HUD handbook.
Id. ¶¶ 74-75.
further allege that the loan servicer (Deval, Inc.) and HUD
failed to respond to Dr. Golz's repeated inquiries about
the loan balance and his ongoing requests for an appraisal,
thereby frustrating Defendants' efforts to pay off the
loan. Id. ¶¶ 80-121. They state that Dr.
Golz promptly notified Deval of his mother's death and
asked for the payoff balance for the loan, but Deval did not
respond to his repeated inquiries. Id. ¶¶
80-84. Therefore, Dr. Golz next contacted HUD at its Denver
Home Ownership Center. Id. ¶ 84. Again
receiving no response, he contacted HUD at its National
Servicing Center, precipitating a series of communications
that were plagued with administrative errors such as missing
enclosures in mailings. Id. ¶¶ 86-87. Dr.
Golz unilaterally provided several deadlines for an
appraisal, none of which were met. Id. ¶¶
88-92. HUD ultimately contacted Dr. Golz about an appraisal,
but Dr. Golz resisted the dates proffered and asked to defer
the foreclosure, citing his desire to first obtain an
engineering inspection and his concerns about the weather and
the accumulating snow. Id. ¶¶ 94-103.
Defendants hired an appraiser on their own to inspect the
property on May 6, 2015. Id. ¶ 104. Then, on
June 3, 2015, they sought to exercise their
“right” to purchase the property by paying
ninety-five percent of the most recent appraisal value.
Id. ¶ 109. The total amount tendered was $118,
750. See ECF No. 71-6 at 4. HUD rejected their
attempt to purchase the property on the ground that it only
accepts appraisals that are ordered by and delivered directly
to HUD or its loan servicer. Am. Answer ¶ 112.
Defendants unsuccessfully disputed HUD's position through
counsel. See Id. ¶¶ 120-21.
three occasions in May and June 2015, HUD's new servicer,
Novad Management Consulting LLC, entered the property and
placed unspecified documents on the door of the home.
Id. ¶ 122. Dr. Golz accused Novad and HUD of
criminal trespass and demanded that their agents not come on
the property again. Id. ¶¶ 122-26. But a
federal contractor forcibly entered the home on December 2,
2016, and installed a “HUD lock” to exclude
Defendants. Id. ¶¶ 128-29. BLM Companies
LLC acquired the property from HUD during this timeframe.
See Id. ¶¶ 129-30. Defendants allege that
BLM staff and HUD administrators committed a number of crimes
by forcibly entering the home and taking possession of the
property. Id. ¶ 131.
initiated this foreclosure action against Defendants on May
9, 2017, see ECF No. 1, and then filed the operative
Amended Complaint on August 18, 2017, see ECF No.
31. Two Defendants-Estate of Verna Mae Golz and William
Golz-filed an Answer and Counterclaims to the Amended
Complaint on September 25, 2017, see ECF No. 46, and
later filed the operative Amended Answer on November 29,
2017, see ECF No. 64-dropping the counterclaims and
raising seven affirmative defenses. Default has been entered
against the remaining Defendants: Marcus J. Golz, Matthew J.
Golz, and the Unknown Heirs and Claimants of the Estate.
See ECF Nos. 30, 33. Despite the entry of default,
these Defendants were listed in the caption of the Amended
Complaint; however, they did not file an Answer, nor have
they filed (or joined in) any briefs in this case.
December 13, 2017, Plaintiff filed this Motion to Strike
Defendants' Affirmative Defenses. ECF No. 71. Defendants
filed their Response on February 2, 2018. ECF No. 81.
Plaintiff then filed a Reply on February 16, 2018. ECF No.