Recent Case Illuminates FHA-HAMP Requirements

If there’s a dispute between a homeowner and a mortgage servicer concerning the requirements of the Federal Housing Administration’s Home Affordable Modification Program (FHA-HAMP) when it comes to a foreclosure sale, who’s likely to win? A recent case, CitiMortgage, Inc. v. Lewis, suggests that a homeowner, at the very least, should have the opportunity to prove that her mortgage servicer violated FHA-HAMP requirements in order to vacate the sale of her property.

Facts of the Case

In 2011, CitiMortgage began foreclosure proceedings against the defendant, Robin Lewis, for failing to make timely mortgage payments. On August 30, 2011, CitiMortgage filed its foreclosure complaint. On September 29, 2011, the defendant filed a pro se appearance and answer to CitiMortgage’s complaint. On March 12, 2012, the defended applied for a mortgage modification through the FHA-HAMP. Just 11 days after the defendant submitted her FHA-HAMP application, CitiMortgage got its judgment of foreclosure, which provided for the property’s sale through a sheriff’s sale or a judicial sale.

By June 22, the defendant was officially denied help through FHA-HAMP. In fact, she received two different letters, about three days apart, denying her FHA-HAMP application. However, shortly thereafter, on June 27, 2012, she received a letter indicating that CitiMortgage required 30 days to determine whether she was in fact eligible “to participate in a foreclosure prevention program.” The defendant’s home was sold on July 2, 2012 through a sheriff’s sale. The defendant filed a motion to have the sale vacated.

It’s not clear why the defendant received two letters denying her FHA-HAMP application due to insufficient income, followed by a third letter indicating that her mortgage modification application was under consideration. However, the defendant did, in fact, receive these three letters. The lower court denied her motion to set aside the sale of her home, and the defendant appealed. The primary issue in this case was whether the defendant’s house was sold in violation of FHA-HAMP requirements.

Appellate Court Finds for Defendant

Under Illinois law, in order to have a sale vacated, the defendant would have to prove:

1)    She applied for assistance under the FHA-HAMP; and

2)    Her property was sold in material violation of the FHA-HAMP.

The Appellate Court looked at the materials the defendant supplied with her FHA-HAMP application and determined that the lower court’s record clearly demonstrated that she had applied for assistance under FHA-HAMP and thus met the first requirement to have the property sale vacated. However, the Court then had to determine whether the defendant’s property was sold in material violation of the FHA-HAMP’s requirements.

The Court took a close look at the fact that the defendant received a letter on June 27, 2012, which indicated that a review of her mortgage modification application would take 30 days. Although the letter didn’t clearly state that the defendant was being evaluated for the FHA-HAMP, the Court emphasized that CitiMortgage knew at that time that the defendant had applied for an FHA-HAMP modification, but it failed to “render a determination on the application prior to the sale” of the defendant’s property.

Why is this important? In short, HAMP guidelines require a mortgage service to “suspend a sale as necessary to evaluate the borrower for HAMP is a timely application is submitted.” Because the defendant submitted a timely application and it was pending at the time of the sheriff’s sale, the Court vacated the lower court’s decision. The Court ordered a new evidentiary hearing to further evaluate whether the defendant’s house was sold in violation of the FHA-HAMP requirements.

Contact an Illinois Foreclosure Defense Attorney

While the FHA-HAMP requirements can be quite complex, an experienced Chicago foreclosure defense lawyer can help you to understand your rights under federal and state law. If you have questions about avoiding foreclosure or applying for a mortgage modification under the FHA-HAMP, don’t hesitate to contact an experienced Oak Park foreclosure defense attorney.

See Related Blog Posts:

Renewed Tax Break for Short Sales

Sluggish Foreclosures in Illinois