Bank Must Comply with HUD/FHA Mortgage Regs Before Foreclosure, Per New Decision

Regulations from the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) require a face-to-face meeting between a mortgage servicer and a homeowner before a foreclosure on a property, if the servicer has any kind of office within 200 miles of the property, according to a new decision from the Massachusetts Appeals Court.

foreclosure massachusetts FHA HUD

Wells Fargo Initiates Foreclosure

The homeowner in this case fell behind on his mortgage and was facing foreclosure. The mortgage, which was insured by HUD/FHA, included a clause stating it could not be foreclosed on “if not permitted by regulations” of HUD. The bank, Wells Fargo, then initiated foreclosure.

HUD regulations, however, say that if there is a branch of the servicer within 200 miles of the property, a property may not be foreclosed on until there is a face-to-face meeting with the homeowner.

FHA mortgages are unique in that the federal government insures them, so if a borrower defaults, then the feds pay. Because the government has this liability, is has special regulations mortgage servicers must comply with when handling FHA loans.

No Face-To-Face Meeting

In this case, however, there had been no face-to-face meeting. Although there was no servicing office of the bank, Wells Fargo, it was undisputed that there were other offices within 200 miles.

The Appeals Court rejected Wells Fargo’s argument that no face-to-face meeting was required, instead holding that the requirement applied no matter what kind of office was within 200 miles.

Previously, some courts had held that the requirement only applies if there is a specific “servicing” office within 200 miles. This decision clarifies that the meeting is required if the bank or mortgage servicer keeps any kind of office.

This case settles an issue that until now has been unresolved in Massachusetts. It expands the protections for homeowners whose loans are insured by the FHA.

The case is here: Jose v. Wells Fargo

Culik Law handles mortgage and foreclosure-defense cases involving any type of mortgage investor, including the FHA, Fannie Mae, Freddie Mac, and private investors. Contact us to see if we can help.

Josef Culik

Josef Culik

Attorney Joe Culik has built his reputation on helping people and has dedicated his practice in Boston, Massachusetts to consumer protection, employee rights, and small business and franchise law.