HUD “Face-to-Face” Counseling Requirements

In PennyMac Loan Services LLC v. Ustarez, the 4th DCA addressed whether the HUD “face to face” meeting requirement of 24 C.F.R. §203.604(b) was a condition precedent to foreclosure. While the Court stated that 24 C.F.R. §203.604(b) is not in and of itself a condition precedent to foreclosure, it held that the regulation becomes one when the express wording of the Note and Mortgage makes it a condition precedent to foreclosure. As the provision contained within the Note and Mortgage in PennyMac expressly stated that it did “not authorize acceleration or foreclosure if not permitted by regulations of the Secretary,” the Court held that “PennyMac contractually agreed to self-impose the HUD regulation on itself before accelerating and foreclosing.” Accordingly, compliance with HUD regulations was required prior to initiating the foreclosure action. Notably, the PennyMac decision made clear that in the absence of a contractual provision expressly incorporating HUD Regulations, 24 C.F.R. §203.604(b) would not act as a condition precedent to foreclosure, but merely “an administrative regulation subject to monetary sanction.”