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FHA Loans Add Extra Steps to Mortgage Foreclosure

 Posted on January 08, 2018 in Mortgage Foreclosure

FHA Loans Add Extra Steps to Mortgage ForeclosureThe Federal Housing Administration, through the Department of Housing and Urban Development, offers protected loans to help lower income borrowers obtain mortgages. The FHA insures the loan, which gives the lender greater certainty that it will be compensated in case of default. As part of the FHA insurance, the lender must follow federal guidelines in contacting borrowers when they default on the mortgage. Failure to document compliance can halt foreclosure efforts on the property.

In-Person Meeting

According to the Code of Federal Regulations, the lender must have or attempt to have a face-to-face meeting with the borrower before the borrower has missed three months of required payments. If the lender does not have the meeting, it must show that it made a reasonable effort to contact the borrower, including:

  • Sending at least one letter of notice, with delivery certified by the U.S. Postal Service; and
  • Visiting the property in person to try to talk to the borrower.


Not all FHA-insured mortgages require a face-to-face meeting before three missed payments. Exceptions include when:

  • The borrower does not live at the property;
  • The property is more than 200 miles away from the lender, its servicers or any branch offices;
  • The borrower has clearly expressed that he or she will not cooperate with the lender; or
  • A repayment plan has already been created.

Recent Case

In U.S. Bank Trust National Association v. Hernandez, an Illinois appellate court overturned a circuit court’s summary judgment for foreclosure because it was not clear whether the bank complied with contact requirements to schedule an in-person meeting. A foreclosure supervisor with a mortgage servicing company claimed to have mailed a notice and visited the property. The borrowers responded that they were never offered a face-to-face meeting with the lender. The lender produced a Federal Express shipping label that showed when and where it sent the notice. The borrowers claimed that federal code requires the notice to be sent through the U.S. Postal Service.

The appellate court did not rule on whether a private mail carrier can officially send the notice but did find enough reason to question whether the notice was sent. Though the lender provided a label with a tracking number, the court stated that it was not indisputable proof that the lender sent the letter. Federal Express clients can create and print their own labels without using them. Thus, the appellate court determined that a summary judgment was not appropriate.

Complying with Federal Code

You do not want your foreclosure to stall because you cannot prove you followed federal regulations. A Chicago creditor’s rights attorney at Dimand Walinski Law Offices, P.C., can advise you on documenting your efforts leading up to foreclosure. To schedule a consultation, call 312-704-0771.


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