Sherwin Law Firm Succeeds in FHA Foreclosure Defense Case

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.

FHA Foreclosure

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.

Conclusion

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.

FHA Loan Foreclosure Requirements

SJC

The Massachusetts Appeals Court issued an important decision on FHA loan foreclosure requirements in Jose v. Wells Fargo Bank (full decision below).  This decision reaffirms the strict requirements that come with foreclosing one of these loans.

A Federal Housing Administration (“FHA”) loan is a loan guaranteed by the federal government, aimed at helping lower income Americans buy homes.  For purposes of foreclosure, FHA loans have much detailed and elaborate requirements than traditional, private loans.  One of these requirements is a “face-to-face meeting” prior to accelerating the loan and foreclosure. This requires the lender to actually meet with the borrower before going forward with the foreclosure process, in an effort to help avoid foreclosure.  This requirement has a practical purpose: the federal government backs these loans if the borrower defaults, so the lender should be making every effort possible to avoid foreclosure.

Jose v. Wells Fargo Bank concerned one of the exceptions to the face-to-face meeting requirement, which allows a lender to avoid this requirement if it has no offices within 200 miles of the borrower.  Wells Fargo argued that this exception applied because there were no branch offices of the mortgagee (the holder of the loan) within this distance from the borrower.  Wells Fargo, undeniably, had branch offices of its servicer within 200 miles of the borrower (who is responsible for the day to day responsibilities of administering the loan).

The Court rejected this argument, holding that under the plain terms of the law, an office within 200 miles of either the mortgagee or servicer does not allow a foreclosing entity to qualify for this exception to the FHA loan foreclosure requirements.  As such, the lender was required to do a face-to-face meeting with the borrower, and its failure to do so made the foreclosure void.

This decision is an important win for homeowners, in that it makes this exemption to the FHA loan foreclosure requirements less viable for many lenders, who frequently have loan servicing offices across the state.  The decision also reaffirms the need to strictly comply with these FHA loan requirements, and the consequences of a lender’s failure to do so.

If you have a FHA loan and are facing a possible foreclosure, contact me to see if I can be of assistance.

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Foreclosure Requirements for FHA Mortgage Loans

Mortgage loans insured by the Federal Housing Authority (“FHA”) include specific requirements for foreclosure that homeowners need to be aware of when facing a possible foreclosure.

FHA mortgage loans are insured by the federal government and are aimed at helping low-income Americans buy a home.  Because the federal government backs these loans, lenders have a greater incentive to lend to those who might not otherwise qualify for a mortgage loan.

FHA mortgages are different than a standard residential mortgage, and include specific requirements for foreclosure.  One of the most important requirements is the “face to face” meeting prior to foreclosure.  This requirement, which comes from federal government regulations, requires lenders to have a face-to-face meeting after the borrower defaults on the mortgage loan, prior to the lender foreclosing the property. Not surprisingly, few lenders comply with these requirement.

Here in Massachusetts, a foreclosing entity needs to strictly comply with the terms of a mortgage prior to foreclosure.  Several courts have found that these FHA mortgage requirements—specifically the “face to face” meeting—is a term of the mortgage and as such, must be strictly complied by the lender in order for a foreclosure to be valid.  As such, a borrower with a FHA mortgage loan has a strong defense against foreclosure if their lender has not complied with this requirement.

If you have a FHA loan and are facing foreclosure, seek the help of an experienced foreclosure defense attorney right away.