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Rejecting an argument that reinstatement meant there has been no default under the “relation
back” doctrine, the court said that doctrine cannot be invoked to impose a legal fiction that belies real
world facts. CF SBC Pledgor 1 2012-1 Trust v. Clark/School, LLC, 2016 IL App (4th) 150568.
No FDCPA Violation In Seeking FHA Deficiency Judgments

Counsel for mortgagees apparently do not violate the Fair Debt Collection Practices Act (15
U.S.C. § 1692 et seq.) by including in their short-form foreclosure complaints indications that
deficiency judgments are being sought against debtors under Federal Housing Administration-
guaranteed mortgages.
Ruling in Heng v. Heavner, Beyers & Mihlar, LLC, __F.3d__, 2017 WL 655433 (7th Cir. 2017),
the Seventh Circuit U.S. Court of Appeals last month found implausible claims that such allegations
threaten “an action that cannot legally be taken or that is not intended to be taken” in violation of 15
U.S.C. § 1692e. It therefore affirmed trial court orders dismissing such claims.

Finding to be out of date documents which suggested FHA had a blanket policy against seeking
deficiencies, the court cited more recent agency guidelines which do not prohibit deficiency claims.
FHA Regs Don’t Apply If Debtor Vitiates Mortgage Through Bankruptcy

A mortgagee on a Federal Housing Administration (FHA) mortgage need not comply with FHA’s
regulations on pre-foreclosure steps where the debtors have obtained a bankruptcy discharge without
reaffirming the mortgage loan.
However, in the usual case, the FHA regulations apply to FHA-guaranteed loans and failure to
follow them provides a defense to a mortgage foreclosure.
So ruled a panel of the Appellate Court’s Second District early this month.

Ruling in PNC Bank, N.A. v. Wilson, 2017 IL App (2d) 151189, the panel found an exception to
the general rule when the debtors had discharged their personal liability upon the mortgage through
bankruptcy, thus making the pre-filing steps required by FHA regulation “futile acts.”

The regulations required the mortgagee to attempt a face-to-face meeting with the mortgagors
and to offer U.S. Postal Service proof that a required notice had been sent by certified mail. PNC in
Wilson had conferred with one of the two mortgagors and had failed to submit a postal service
certificate of the mailing.
However, the panel said denying summary judgment because of the regulations wasn’t required.

“The Wilsons’ discharge in bankruptcy without reaffirmation means that they are no longer bound
by the mortgage contract,” the panel stated. “To send notice in order to remediate or ameliorate a
mortgage contract when the contract has been nullified by the act of the debtor is futile and
meaningless. . . . The law does not require futile acts as prerequisites to the filing of legal
proceedings.”
Brenda \Sharp Thinking\#143.pdf
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