Now An Ohio Legal Aid Firm Is Now Taking The FHA Foreclosure Defense Strategy To Another Level

halt-man-mdMost attorneys have been arguing what I call the “Paragraph 22” argument for a while. My argument refers to Paragraph 22 that appears in most standard mortgage agreements.

Paragraph 22 basically says that the lender has to notify a homeowner and that they are officially in default. Then, the lender must also give the homeowner an opportunity to cure the default. 

However, FHA loans take this FHA Foreclosure Defense Strategy in a different direction.

24 CFR 203.604 requires lenders to allow the homeowner a face to face meeting. This meeting is to happen no later than the 61st day of delinquency. The purpose is to discuss payment options before the lender proceeds with acceleration and foreclosure. 

Using 24 CFR 203.604 As An FHA Foreclosure Defense Strategy

24 CFR 203.604(b) states:

(b) The mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid. If default occurs in a repayment plan arranged other than during a personal interview, the mortgagee must have a face-to-face meeting with the mortgagor, or make a reasonable attempt to arrange such a meeting within 30 days after such default and at least 30 days before foreclosure is commenced, or at least 30 days before assignment is requested if the mortgage is insured on Hawaiian home land pursuant to section 247 or Indian land pursuant to section 248 or if assignment is requested under § 203.350(d) for mortgages authorized by section 203(q) of the National Housing Act.

24 CFR 203.604(c1-c5) states:

(c) A face-to-face meeting is not required if:

(1) The mortgagor does not reside in the mortgaged property,

(2) The mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either,

(3) The mortgagor has clearly indicated that he will not cooperate in the interview,

(4) A repayment plan consistent with the mortgagor’s circumstances is entered into to bring the mortgagor’s account current thus making a meeting unnecessary, and payments thereunder are current, or

(5) A reasonable effort to arrange a meeting is unsuccessful.

24 CFR 203.604(d) states:

(d) A reasonable effort to arrange a face-to-face meeting with the mortgagor shall consist at a minimum of one letter sent to the mortgagor certified by the Postal Service as having been dispatched. Such a reasonable effort to arrange a face-to-face meeting shall also include at least one trip to see the mortgagor at the mortgaged property, unless the mortgaged property is more than 200 miles from the mortgagee, its servicer, or a branch office of either, or it is known that the mortgagor is not residing in the mortgaged property.

24 CFR 203.604(e1-2) states:

(1) For mortgages insured pursuant to section 248 of the National Housing Act, the provisions of paragraphs (b), (c) and (d) of this section are applicable, except that a face-to-face meeting with the mortgagor is required, and a reasonable effort to arrange such a meeting shall include at least one trip to see the mortgagor at the mortgaged property, notwithstanding that such property is more than 200 miles from the mortgagee, its servicer, or a branch office of either. In addition, the mortgagee must document that it has made at least one telephone call to the mortgagor for the purpose of trying to arrange a face-to-face interview. The mortgagee may appoint an agent to perform its responsibilities under this paragraph.

(2) The mortgagee must also:

(i) Inform the mortgagor that HUD will make information regarding the status and payment history of the mortgagor’s loan available to local credit bureaus and prospective creditors;

(ii) Inform the mortgagor of other available assistance, if any;

(iii) Inform the mortgagor of the names and addresses of HUD officials to whom further communications may be addressed.

Legal Aid Group Successfully Used This As An FHA Foreclosure Defense Strategy

As a result, Advocates for Basic Legal Equality (ABLE), a legal aid group from Ohio is suing US Bank in federal court in Ohio on behalf of the United States government. ABLE is making a claim under the False Claims Act. 

In their suit, ABLE asserts that US Bank made false claims to the government. ABLE alleges this is in order to get FHA to cover borrower deficiencies on FHA mortgages. In addition, they allege these loans went into default without the required steps to try to work with homeowners. These tules are codified under 24 CFR 203.604. 

However, the jury is still out if federal judges will buy into this argument. Some state courts in Maryland and Massachusetts have.

Call us today at 888.737.6344 to learn more about your rights with an FHA loan.

Also, check out this other articles about FHA foreclosure defense:

How To Beat An FHA Foreclosure Without Acting Like A Crazy Cat Lady

The CFPB Wants To Postpone Foreclosures Until 2022. Can They?

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