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Lender’s Failure To Comply With HUD’s Face-To-Face Meeting Requirement Dooms Indiana Mortgage Foreclosure Action

Lesson. A borrower/mortgagor may be able to defeat a foreclosure action if a lender/mortgagee does not comply with HUD regulations designed to be conditions precedent to foreclosure. For example, in certain cases, a failure to have an in-person meeting with the borrower/mortgagor before the borrower becomes more than three full months delinquent in payments, could lead to the dismissal of a subsequent foreclosure case.

Case cite. Gaeta v. Huntington, 129 N.E.3d 825 (Ind. Ct. App. 2019). NOTE: Gaeta is a so-called “memorandum decision,” meaning that, under Indiana law, the opinion is not supposed to be regarded as precedent or cited before any court. Nevertheless, the analysis and outcome are noteworthy.

Legal issue. Whether, in the context of a HUD-insured loan, a lender violated 24 C.F.R. 203.604 by failing to have a face-to-face meeting with the borrower before three monthly installments due on the loan went unpaid and, if so, whether the violation constituted a defense to the lender’s subsequent foreclosure suit.

Vital facts. The nine pages summarizing the underlying facts and the litigation in the Gaeta opinion tell a long and complex story. From the view of the Indiana Court of Appeals, the keys were: (1) the borrower defaulted under the loan by missing payments, (2) the lender failed to have a face-to-face interview with the borrower before three monthly installments due on the loan went unpaid, and (3) the lender filed a mortgage foreclosure action without ever having the face-to-face meeting.

Procedural history. This residential mortgage foreclosure case proceeded to a bench trial, and the court entered a money judgment for the lender and a decree foreclosing the mortgage. The borrower appealed.

Key rules.

24 C.F.R. 203.604(b) requires certain lenders to engage in specific steps before they can foreclose. One of those steps is to seek a face-to-face meeting with the mortgagor (borrower) “before three full monthly installments due on the mortgage are unpaid….” Click here for the entire reg.

There are exceptions to the face-to-face requirement, one of them being if the parties enter into a repayment plan making the meeting unnecessary. See, Section 604(c)(4).

The Court cited to and relied upon its 2010 opinion in Lacy-McKinney v. Taylor, Bean & Whitaker Mortgage, 937 N.E.2d 853 (Ind. Ct. App. 2010). Please click on the “related post” below for my discussion of that case.

“Noncompliance with HUD regulations [can constitute] the failure of the mortgagee to satisfy a HUD-imposed condition precedent to foreclosure.”

Not all mortgages are subject to HUD regs – only loans insured by the federal government.

Holding. The Court of Appeals reversed the trial court’s in rem judgment that foreclosed the mortgage. However, the Court affirmed the money judgment.

Policy/rationale. The Court concluded that the lender’s failure to conduct, or even attempt to conduct, a face-to-face meeting with the borrower before he became more than three months delinquent was a “clear violation” of applicable HUD regs. The lender made several arguments – very compelling ones in my view – as to why it substantially complied with the reg or did not violate the reg to begin with. The trial court agreed. The Court of Appeals disagreed, choosing to apply a strict reading of the law.

See the opinion for more because no two cases are the same, and the outcome could be different in your dispute. The silver lining, if there was one, for the lender was that the in personam judgment on the promissory note stood and thus created a judgment lien on the subject property. The debt was not extinguished - only the mortgage.

Related post. In Indiana, Failure To Comply With HUD Servicing Regulations Can Be A Defense To A Foreclosure Action 
Part of my practice includes representing lenders, as well as their mortgage loan servicers, entangled in contested residential foreclosures and servicing disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

Marion County (Indianapolis) Sheriff's Sales Will NOT Start Back Up In July

Following-up last week's post (below), we learned this morning that the sheriff's office has postponed the July sale "due to the extended evictions and foreclosures issued by Gov Eric Holcomb through August 1st."  No sale in July.


Following the COVID-19 cancellations of the March, April, May, and June sales, the Marion County Civil Sheriff's Office is back in business.  The first sale since February will occur on July 15th.  Here is an email distributed by the Real Estate team this morning:


NEW LOCATION FOR THE JULY SALE - 8115 E. Washington St, Indianapolis IN 46219. Great parking.

You may come between 8:00 a.m. and 10:00 a.m. the morning of the sale, July 15th at 8115 E. Washington St and leave your deposit. However, we will end this process at 10:00 a.m. So if you are in line and the time hits 10:00 a.m. you will not be able to leave your deposit. So our suggestion is that you still come to the City-County Building at 200 E. Washington St 11th Floor conference room the day before the sale between 8:00 a.m. and Noon. Only one person allowed in the conference room at a time. Please social distance in the hallway of 6 feet.

For those of you that are in the pilot program you may still continue to send your registration form and check via email. Teena will stay one hour after the sale at 8115 E Washington St for you to bring your check back or you may also take it downtown to the City County Building right after the sale and Lori will be there to also take your check. Your choice.

It is mandatory that you stay and pick up your check if you did NOT win a bid. We will instruct you on this process the day of the sale.


A mask is required at the new location and in the City County Building.
Only bidders that have a paddle will be allowed in the bidding room. Other guest and attorney’s not bidding must go into the conference room. You will be able to hear the bidding process in that room. The conference room is not very large and may be difficult to social distance as per the recommendations of CDC. Please take this into consideration when choosing on whether or not you would like to attend since only 1 bidder is allowed in the bidding room per company/investor.

We will update the website soon as well with these changes. Please feel to contact us with any questions.

RE Team

Please visit our website: https://www.indy.gov/activity/sheriff-real-estate-sales


I represent parties in connection with foreclosure cases and sheriff’s sales. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

“Debtor” In Alleged Fraudulent Transfer Must Be Liable For Creditor’s Underlying Claim

Lesson. If there is no underlying claim, then there can be no fraudulent transfer.

Case cite. Underwood v. Fulford, 128 N.E.3d 519 (Ind. Ct. App. 2019)

Legal issue. What is a “debtor” under Indiana’s Uniform Fraudulent Transfer Act?

Vital facts. This case arises out of a tangled web of disputes between parties to a real estate transaction. Many suits and many years led to this particular opinion. To cut to the chase, Underwood alleged that Kinney, before he died, conveyed certain properties to his wife for the purpose of defrauding Underwood, a purported creditor of Kinney (later, his Estate). The Underwood decision dealt with both the underlying action for damages and the fraudulent transfer action. The nature of Underwood’s primary claim is not important here. The key is that both the trial court and the Court of Appeals concluded that the Estate owed no money to Underwood.

Procedural history. The trial court dismissed Underwood’s fraudulent transfer claim, and Underwood appealed.

Key rules. Indiana's UFTA, at Ind. Code § 32-18-2-14, generally provides that:

A transfer made … by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made…, if the debtor made the transfer ... with actual intent to hinder, delay, or defraud any creditor of the debtor[.]

The statute defines a “debtor” as “a person who is liable on a claim.” I.C. § 32-18-2-2.

Indiana courts previously have declared, “a defendant cannot logically be held liable for a fraudulent transfer … if he is not to be held liable for the creditor’s underlying claim.” In other words, when a “UFTA defendant is not a debtor to the plaintiff, dismissal is proper.”

Holding. The Court affirmed the trial court’s dismissal of the UFTA action.

Policy/rationale. The Court first concluded on a separate contention that Underwood had no claim for damages against the Estate. Based on that premise, the Estate was not a “debtor” under the UFTA. For reasons that frankly are not altogether clear, Underwood continued to press her theory that the Estate was a debtor, but the Court found that she “failed to present a cogent argument” in support of her theory. The outcome is not surprising here, but the discussion is nonetheless noteworthy. For those who may be analyzing the viability of a fraudulent transfer claim, Underwood highlights who can be a “debtor” under the UFTA and why that definition is significant.

Related post. More On Piercing The Corporate Veil In Indiana, And The UFTA
Part of my practice is to advise parties in connection with post-judgment collection matters. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

Indiana Supreme Court's 5/29/20 Order Extending Its 3/16/20 Order Related to COVID Relief And Procedures

On May 29, 2020, the Supreme Court entered the following order:  Order Extending Trial Courts' Emergency Tolling Authority and Setting Expiration of Other Emergency Orders.  The latest order follows-up the original order entered March 16, 2020, which I discussed in the following post from that date:  Indiana State Bar Association: COVID-19 Updates for the Legal Community

Be sure to check your relevant county courts for any local measures adopted.  For example, here in Marion County (Indianapolis), the Indiana State Bar Association released the following on May 18th:

We wanted to share the below update from the Marion Superior and Circuit Courts.

The Indiana Supreme Court has required that all Indiana trial courts seek advice and guidance from stakeholders. Based on this advice and guidance, you can expect that the earliest date the Marion Superior and Circuit Courts may return to any in-person hearings would be June 15. This is based on guidance and orders from the Indiana Supreme Court, collaboration with the controller and other city officials, as well as expert medical advice. 

Due to the high number of COVID-19 positive cases and deaths in Marion County, the courts are currently at least two weeks behind Governor Holcomb's Roadmap to Safely Reopen Indiana. The City-County Building is a particularly tough building to comply with the CDC and state/local health department requirements and recommendations. On an average day, 5,000 individuals enter the building, including employees. The city is in the process of engaging a firm with expertise in assisting all branches of government and city/county agencies in operating safely in a COVID-19 environment. This requires modification of the building in many areas. Some examples are installation of plexiglass, how elevators will be used by staff and the public, use of PPE by employees and the public, and what screening measure(s) will be used to enter the building, just to name a few.

With questions about a case, visit mycase.in.gov.

If you need the assistance of court staff, click here to visit the Marion Superior Court’s website for a listing of essential staff, or click here to visit the Marion County Circuit Court website. This is the best way to obtain information about a particular court and/or that court’s practices and policies during this time. While there is a general voicemail for the court system, court-specific phone communication is not possible at this time.