Wells Fargo Bank, N.A. v. Lorson
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The Supreme Court reversed the judgment of the appellate court affirming the trial court's judgment of strict foreclosure, holding that the appellate court erred in holding that noncompliance with federal Department of Housing and Urban Development (HUD) regulations is a special defense that Defendant must plead and prove and that the case must be remanded for a trial.
Defendant executed a mortgage in a mortgage deed that were guaranteed and/or insured by the Federal Housing Administration (FHA) and ultimately assigned to Plaintiff. Under the terms of the mortgage deed and note, Plaintiff was not authorized to accelerate payment of the debt or to initiate foreclosure proceedings unless permitted by HUD regulations. After Defendants defaulted on the note and mortgage the trial court entered a judgment of strict foreclosure. The appellate court affirmed. The Supreme Court reversed, holding (1) compliance with applicable HUD regulations is a condition precedent to enforcement of the note and foreclosure of the mortgage and must be pleaded and ultimately proved by the mortgagee; and (2) the trial court erred by failing to require Plaintiff to establish compliance with HUD regulations at trial.
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