Last week, I had a successful outcome in a FHA foreclosure defense case. My client was facing a post-foreclosure eviction and I raised a successful defense regarding the lender’s non-compliance with the foreclosure requirements for these types of loans.
A Federal Housing Administration (“FHA”) loan is a loan guaranteed by the federal government and designed to help home buyers who would not meet the traditional lending requirements for purchasing a home. Because the federal government insures these loans, lenders are more willing to offer loans to potential buyers who might otherwise be considered a high risk for lending.
FHA foreclosures require lenders to comply with many more requirements than those associated with a standard mortgage agreement. Lenders of FHA loans must review borrowers for loan modifications and other loss mitigation opportunities and, in most circumstances, have a “face-to-face” meeting with the borrower prior to foreclosure.
Strict Compliance Is Required for FHA Foreclosures
Massachusetts is a non-judicial foreclosure state, which allows lenders to foreclose without bringing a court case against the borrower. This is in contrast to states like New York and Vermont, where a lender needs to file a lawsuit against a borrower to foreclose. Here in Massachusetts, a lender must strictly comply with the applicable foreclosure requirements. Failure to do so will make the foreclosure void.
The Appeals Court has extended this strict compliance requirement to FHA foreclosures. A lender’s failure to comply with the “face-to-face” requirement will be fatal to a foreclosure’s validity.
While I am aware of no case on this, I believe that this type of foreclosure defense would equally extend to the other FHA foreclosure requirements, including reviewing a borrower for a loan modification.
For this reason, borrowers who are facing FHA foreclosures often have viable defenses in these cases.
Outcome of Case
In this case, the lender alleged to have performed the required “face-to-face” meeting, but only after it accelerated the mortgage loan (where the lender demands the entire loan balance prior to foreclosing). Because this meeting came after, and not before, the loan acceleration, the lender failed to comply with this foreclosure requirement, making the foreclosure void.
While it is sometimes obvious that the lender made an error with the foreclosure requirements, such mistakes are not always clear. Here, this foreclosure defense required a strong understanding of the non-judicial foreclosure process and these FHA requirements.
The benefits of having an experience foreclosure defense attorney is essential in dealing with one of these cases. If you need assistance in defending against an FHA foreclosure, contact me for a consultation.