FHA Mortgage Foreclosure Reversed:
Court wants Lender to prove the followed correct procedure
FHA loans have been widely used, more so since the implosion of sub-prime lenders, for mortgages where insufficient documented credit is available, or where credit is less than perfect for other reasons. In Ohio, in Lakeview Loan Servicing LLC v. Dancy, the lender filed its foreclosure in 2014, presenting an affidavit attesting the proper notice of the borrower’s default was issued in accordance with the terms of the note and mortgage.
An FHA mortgage foreclosure must follow HUD’s specific requirements for foreclosure process. Though the case judge issued a judgment and decree in foreclosure, when the homeowner appealed the ruling, the court of appeals focused on the following regulation under CFR Title 24 Housing and Urban Development: “The mortgagee [lender] shall give notice to each mortgagor [borrower] in default on a form supplied by the Secretary or, if the mortgagee wishes to use its own form, on a form approved by the Secretary, no later than the end of the second month of any delinquency in payments under the mortgage.” The appeals court remanded the case to trial to determine whether the lender complied with the above referenced regulation.
Why, in a case where a foreclosure appeared to be warranted; the borrower did not contest whether the payments were past due; did the court rule in the homeowner’s favor? First of all, remember this was an FHA mortgage, which was designed to help people who normally cannot obtain a conforming mortgage achieve home ownership. Setting that aside, in an era of grave mistrust of lender process, are judges ruling on the side of caution? Certainly, it is better to decide now whether the house should be foreclosed, rather than attempting to untangle ownership after another party bought the house at Sheriff’s auction. And, certainly, when foreclosure costs rise higher due in part to borrower defenses against those actions, Lenders may be more willing to work out a resolution before dumping the collateral. Let’s not forget that in certain areas, there is still a glut of bank owned properties waiting to be sold, so vacant housing is still creating blight in neighborhoods no longer in demand.
Some of the court decisions are based on precedent set in the last decade as wave after wave of fraudulent activity and coverups were uncovered. Some of the decisions are based on the need to move forward as a nation and finish cleaning up the mess. This dichotomy may have resulted in case by case decisions by different judges with no trend or pattern apparent. Regardless of the prior decisions rendered by different court judges, homeowner cases will hinge on how well documented the good faith efforts to comply with the terms of the mortgage agreement, and how well documented the events were as they unfolded .
If you have an FHA mortgage and feel you are the victim of improper foreclosure procedure by your lender, talk to a professional Now. Get the help and support you need, from experienced professionals.
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