Face to Face Counseling: The Victory is Coming

About 10% of the cases I have involve an FHA mortgage.  I like these cases, because I believe the express terms of these mortgages require the lender provide face-to-face counseling before accelerating and foreclosing.  The operative regulation is contained in 24 C.F.R. 203.604, and this is an issue I’ve briefed and argued countless times and discussed on this blog.

Unfortunately, no Florida court has ruled whether the face-to-face counseling requirement of 24 CFR 2.03.604 is a condition precedent, such that the lender bears the burden of proof at trial, or an affirmative defense, such that the borrower bears the burden of proof.

On Friday, Florida’s Fifth District decided Diaz v. Wells Fargo Bank.  The decision doesn’t decide the issue, as the mortgage in that case wasn’t an FHA mortgage.  On that fact pattern, unsurprisingly, the Fifth District ruled HUD Regulations did not act as a condition precedent.  In so ruling, however, the Fifth District strongly hinted that it considers HUD Regulations a condition precedent in an FHA Mortgage.  Check out this language, quoted from the opinion:

Unlike scenarios where conditions precedent are ascertainable on the face of a written contract, such as compliance with paragraph twenty-two of the mortgage or where a promissory note specifically incorporates the HUD Regulations into its terms, it is by no means clear that the HUD Regulations applicable to federally insured loans apply to the instant loan and litigation.

For years now, I’ve been arguing HUD Regulations are a condition precedent in an FHA Mortgage, just like paragraph 22 is in the standard, Fannie Mae mortgage, because the mortgage terms expressly say so.  Given this sentence, it seems clear to me that the Fifth District agrees.  So don’t give up on those FHA cases, folks.  I’m confident some good law is going to emerge here, and soon.

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