Case Requires Bank to Show Compliance with FHA Requirements
For the most part, every mortgage and note are generally the same (at least in Florida, and if we’re talking about first mortgages on residential property). That is, they use the same basic language, with the same requirements imposed on the lender and the borrower.
But FHA loans are a little different. FHA loans are those that are insured by the federal government; if you don’t pay your loan, the FHA will pay the lender for its losses. Because of that guarantee, the lender has to abide by the federal government’s rules in handling, servicing and foreclosing on the loan.
A mortgage and note in an FHA loan will often specifically state these extra requirements, which the lender must comply with before foreclosing on the loan, if the lender wants FHA to insure the loan. The problem is that sometimes lenders comply with these requirements and sometimes they don’t. A new case, Chrzuszcz v.Wells Fargo Bank, N.A. out of Florida’s First District, recently held that if the lender does not comply with them, the loan cannot legally be foreclosed on.
Lender Must Show Compliance with FHA Regulations
The FHA loan in the case required compliance with federal regulations, which contain a provision that before foreclosing, the lender must have a face-to-face meeting with the borrower, or at least make an attempt to do so.
At the foreclosure trial, the bank’s witness presented no evidence that the bank even attempted to comply with this meeting provision. The borrower requested that the judge dismiss the case because the borrower contended that the meeting was a mandatory prerequisite to foreclosing.
A judgment of foreclosure was eventually entered, and the borrower appealed.
What is a Condition Precedent?
The appellate court noted that a condition precedent was something that had to be complied with before an actual breach can legally happen. Anybody suing on any type of contract has to show compliance with conditions precedent before filing a lawsuit.
The court noted that although the bank in the case alleged it had complied with all conditions precedent, the borrower had denied that allegation. That meant that the burden was on the bank to show that it had complied. Because the bank’s witness said nothing about any face-to-face meeting, there was no compliance with that section, and the case should properly have been dismissed.
For anyone who has an FHA mortgage in foreclosure and who has not been contacted about meeting to discuss the default, this is a very good case, which will assist in defending a foreclosure. In fact, it potentially brings into play compliance with all other requirements on lenders in an FHA loan, which banks may have to show a court they complied with before getting a foreclosure judgment.
However, banks read these cases as well, and you can expect them to at best start complying with the FHA rule, or at worst, being dishonest about past attempts to comply with it.
If you are facing foreclosure, don’t go it alone. Contact Jacobs Legal in Miami today to discuss every available option and defense to your foreclosure case.