Archive for September 26th, 2014

HUD Regulations in an FHA Mortgage …. All Aboard!

I’ve blogged about a bank’s obligation to provide face-to-face counseling in an FHA Mortgage a couple of times now, introducing the concept here and providing a detailed appellate brief with many case citations here.  Those banksters, though … they’re good.  And they won’t go down without a fight.  Just take a look at what they did in Real Estate Mortgage Network, Inc. v. Knight, Case No. 4D13-1880 (Fla. 4th DCA 2014).

In that case, the lower court granted summary judgment in the homeowner’s favor based on the bank’s failure to comply with HUD Regulations, essentially adopting the argument I’ve set forth in these blogs.  Unfortunately, that ruling was incorrect for procedural reasons.  As the Fourth District explained, where the homeowner introduced evidence at the summary judgment hearing that the bank did not comply with HUD Regulations, but the bank introduced evidence it did comply, the court should have denied summary judgment and allowed the case to go to trial.  You see, at the summary judgment stage, the court cannot resolve conflict evidence, as that is the purpose of trial.  That’s basically what the Fourth District ruled in Knight.

The banksters, though, they didn’t want to win merely on the procedural issue.  They wanted the whole shebang.  They wrote a brief – a really good brief, actually – and asked the appellate court to rule the HUD Regulations don’t apply at all.  If this were a baseball game, the banksters were swinging for the fences – and they picked a good pitch to do it on, too.  After all, the opinion doesn’t reflect it, but if you look at the Fourth District’s docket, you’ll see the homeowner’s lawyer did not even write a brief.  Yes, the banksters pushed a case to the appellate courts – a significant appeal, challenging an issue for which there is little precedent – in a case where the homeowner’s lawyer did not even file a brief!!  What a scary thought, to ponder the possibility that a Florida appellate court could have ruled that HUD Regulations do not apply to banks even in FHA Mortgages based on one appeal where the homeowner’s lawyer didn’t even present an argument!

Anyway, we’re all fortunate the Fourth District did not buy what the banksters were selling – at least not all of it.  Yes, the bank won Knight on the procedural issue.  But the question of whether the HUD Regulations apply in an FHA Mortgage – that’s the big question, the legal issue that affects the entire industry.  On that point, here’s what the Fourth District ruled:

REMN argues on appeal that the court erred in applying the HUD Regulations and finding they were a mandatory condition precedent.  We have held that non-compliance with HUD Regulations may be asserted as an equitable defense in mortgage foreclosure proceedings.  Cross v. Fed. Nat’l Mortg. Ass’n, 369 So. 2d 464, 465 (Fla. 4th DCA 1978).

As I read that, the Fourth District is clearly saying that HUD Regulations may be used as a defense to foreclosure of an FHA mortgage, i.e., yes, this is a defense.  As a result, even though Knight ruled in favor of the bank, I’ll be using it to support my arguments for consumers in FHA cases.

Could the opinion be clearer in that regard?  Certainly.  It could be better.  It could say that the HUD Regulations are a mandatory condition precedent in an FHA Mortgage.  But think of it this way … if the banksters couldn’t get what they wanted out of the appellate courts despite a well-written brief in a case where the homeowner did not even present any arguments, they’re certainly not going to get what they want in the future (particularly now that I’ve laid the arguments and case law out there for all to see).

The banks’ failure to comply with HUD compliance with HUD Regulations is a viable defense to foreclosure of an FHA Mortgage, and I’m confident the defense is here to stay.

Mark Stopa

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