A circuit court judge in Kane County, Illinois dismissed Freedom Mortgage Corporation’s (Freedom) foreclosure based on Freedom’s failure to comply with federal HUD regulations codified at 24 C.F.R. § 203.604(b)-(d). Freedom Mortgage Corp. v. Olivera, et al., 2021 Il. App. (2d) 190462, Case No. 2-19-0462 (Ill.App.2 Dist. August 5, 2021). In pertinent part, § 203.604 requires the lender at least attempt to conduct a face-to-face meeting prior to a borrower missing three monthly mortgage payments.
Freedom appealed the order of dismissal to the Second District Appellate Court which affirmed the lower court. The Court explained that non-complying lenders would still able to foreclose and that missed payments would not be “forgiven,” per se; rather, the missed payments would reduce the amount of the borrowers’ personal liability in any deficiency judgment. For example, here, Freedom could file a new lawsuit based on a default date that occurred after Freedom complied with § 203.604.
Although the Court reached a harsh result, § 203.604 clearly lays out the requirements for servicing a HUD loan and compliance can easily be achieved with implementation of some simple protocols.
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