2. Consolidated's Liability for Mortgages Two or More Months Delinquent or in Foreclosure At the Time of Transfer.
As noted, upon execution of the Guaranty Agreements, Consolidated assumed the risks inherent in participation in the GNMA program. See MBS Guide, Ch. 4. Among the risks assumed by Consolidated was the risk of losses arising from foreclosure and delinquencies. Accordingly, the Court finds and declares Consolidated liable for losses incurred by GNMA resulting from mortgages in foreclosure or two or more months delinquent at the time of transfer of the Consolidated portfolio to Charter. As of December 31, 1979, the known losses incurred by GNMA and attributable to Consolidated in connection with mortgages in this status are $ 153,162.81.
Some of this loss may be recovered by GNMA upon the sale of properties now held by GNMA.
In that event, GNMA must inform Consolidated of the extent of recovery to enable Consolidated to lodge a claim for reimbursement. Nevertheless, GNMA is entitled to hold Consolidated liable for the $ 153,162.81 loss sustained to date. It cannot be genuinely disputed that but for Consolidated's default and the subsequent transfer of the portfolio to Charter, Consolidated would have assumed this loss. The Court can perceive of no reason Consolidated's default should operate to transfer its losses to GNMA. These losses are, and must remain, attributable to Consolidated.
3. Consolidated is Liable for Losses Incurred by GNMA to Restore Deficits in the Tax and Insurance Custodial Accounts.
Each monthly payment by a mortgagor of a mortgage in a GNMA pool, comprises 1) principal repayment, 2) interest, 3) approximately one-twelfth of the annual property taxes due on the mortgaged property, and 4) approximately one-twelfth of the annual premium on casualty insurance for the mortgaged property. The Guaranty Agreements provide that all collections of principal, interest, taxes and insurance premiums shall be deposited in custodial accounts maintained solely for that purpose. Agreement, §§ 4.11, 4.13. The Agreements also provide that withdrawals from the custodial accounts shall be made only for specified purposes such as payment of investors, taxes or insurance premiums. Id.
Upon the transfer of the Consolidated portfolio, Charter assumed control of Consolidated's custodial accounts. In reviewing bank records of these accounts, Charter determined a deficiency of $ 44,652.76 in Consolidated's tax and insurance custodial accounts.
Charter was subsequently reimbursed by GNMA for this deficiency.
While Consolidated claims that it did not withdraw any funds from these accounts improperly, it does not adequately explain the $ 44,652.76 deficiency. Because Consolidated would be liable for such a deficiency absent the transfer of the accounts to Charter, the Court finds and declares Consolidated liable to GNMA for the missing funds.
4. Consolidated is Liable for Unrecouped Advances Made by GNMA to the Portfolio.
The Guaranty Agreements provide that where collections do not equal the total payments currently due investors, "the Issuer shall prepare to make and shall make advances from its own funds." Agreement, § 4.03. Moreover, the MBS Guide states that "any losses of principal and/or interest which, by the terms of the Guaranty Agreement, should have been borne by the defaulting issuer will be assessed to, and paid by the defaulting issuer at the time such losses become known." MBS Guide, Ch. 11, P 11-5.
Upon the declaration of default by GNMA, Consolidated was unable to meet the next payment due investors. Accordingly, on April 15, 1978, GNMA advanced $ 484,548.62 to the Consolidated portfolio for the purpose of making the payment to investors.
This amount represents the deficiency in collections of principal and interest by Consolidated as of that date.
At present, GNMA has recovered $ 301,557.78 of this advance.
GNMA now seeks to hold Consolidated liable for the $ 182,990.84 in unrecouped advances. Under the terms of the Guaranty Agreements existing between the parties, Consolidated is liable for unrecouped advances. The default by Consolidated simply has no effect on this liability. Accordingly, the Court finds and declares Consolidated liable to GNMA in the amount of $ 182,990.84 in unrecouped advances.
5. Consolidated is Liable to GNMA for GNMA's Costs In Acquiring and Transferring the Portfolio.
Charter incurred costs of $ 30,002.31 in connection with the acquisition and conversion of the Consolidated portfolio.
These costs include such items as moving expenses incurred in physically transferring the portfolio records, establishing satisfactory servicing records to conform with Charter's servicing practices, inspection of mortgage properties, the costs of a mailing to all mortgagors to confirm each loan balance and to inform each mortgagor of the new servicer's identity and procedures for remitting payments, and costs of notifying the FHA of the change of mortgagee. GNMA has reimbursed Charter for these costs.
Such costs would not have been incurred but for Consolidated's default. Accordingly, the Court finds and declares consolidated liable to GNMA for $ 30,002.31 representing the costs of transferring the mortgage portfolio from Consolidated to Charter.
D. Consolidated's Argument that GNMA Failed to Mitigate Consolidated's Losses Is Not Properly Before the Court.
Consolidated unpersuasively argues that GNMA has failed to discharge its good faith obligation to mitigate Consolidated's losses. However, the Court finds no convincing indication of a failure by GNMA to mitigate the losses for which it now seeks recovery from Consolidated. Moreover, Consolidated's assertions concerning mitigation are not properly before the Court. Mitigation is an affirmative defense that is required by Rule 8(c) of the Federal Rules of Civil Procedure to be "set forth affirmatively" by Consolidated in its responsive pleading. See 5 C. Wright & A. Miller, Federal Practice and Procedure § 1273 (1969). Defendants' claims for damages against Consolidated are set forth in their counterclaim, filed January 15, 1980.
Consolidated's responsive pleading, filed February 22, 1980, sets forth no affirmative defenses whatsoever. Failure to plead an affirmative defense results in a waiver of that defense and its exclusion from the case. Camalier & Buckley-Madison, Inc. v. Madison Hotel, Inc., 168 U.S. App. D.C. 149, 513 F.2d 407, 419 n.92 (D.C.Cir.1975); see also 5 C. Wright & A. Miller, Federal Practice and Procedure § 1278 (1969 & Supp.1979) and cases collected therein. Accordingly, the defense of failure to mitigate damages was waived by Consolidated and is not properly before the Court.
In accordance with the foregoing, the Court finds and declares Consolidated liable to GNMA in the amount of $ 582,794.83. The Court also finds and declares that, upon recovery of the delinquent funds which necessitated the particular advances, Consolidated has the right to reimbursement of advances made to the custodial accounts. Judgment shall be entered accordingly and this case shall be dismissed. An order in accordance with the foregoing shall be issued of even date herewith.
Upon consideration of the entire record herein and in accordance with the Memorandum Opinion issued of even date herewith, it is, by the Court, this 23 day of July, 1980,
ORDERED, that defendants' motion for summary judgment be, and the same hereby is, granted in part and denied in part in accordance with the terms of the Memorandum Opinion issued of even date herewith; and it is
FURTHER ORDERED, that judgment on count five of plaintiff's amended complaint be, and the same hereby is, entered for plaintiff in accordance with the terms of the Memorandum Opinion issued of even date herewith; and it is
FURTHER ORDERED, that judgment in the amount of Five Hundred Eighty-two Thousand Seven Hundred Ninety-four Dollars and Eighty-three Cents ($ 582,794.83), with interest, be, and the same hereby is, entered for defendants; and it is
FURTHER ORDERED, that this case be, and the same hereby is, dismissed, each party to bear its own costs.