DCA FINDS BORROWER WAIVED | Key Points

1. The Fourth DCA found dismissal of a bank’s (“BOA” or “the Bank”) foreclosure improper under 24 C.F.R. § 203.604 based on an exception to the rule. Section 203.604 applies to FHA backed loans and requires a mortgagee “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.” 24 C.F.R. § 203.604.

2. After default, but prior to the Bank initiating foreclosure, the borrowers sent a cease and desist letter to the Bank wherein they threatened litigation if the Bank communicated with them or contacted them. The Bank interpreted this letter to be a “clear expression that the Borrowers would not cooperate with the Bank to conduct a face to face meeting.” Section 203.604 includes five exceptions to the rule, one of which states a meeting is not required if “the mortgagor has clearly indicated that he will not cooperate in the interview.” § 203.604(c).

3. The Fourth DCA found the Bank’s reasoning in this regard sound. In reversing the involuntary dismissal the DCA explained that any other interpretation of the language in the cease and desist letter would put the Bank in “an untenable situation and would render the regulatory exception meaningless.” The Court reversed the order of dismissal and remanded the matter for further proceedings.

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