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Bankers Life Co. v. Denton

OPINION FILED DECEMBER 29, 1983.

BANKERS LIFE COMPANY, PLAINTIFF-APPELLEE,

v.

JAMES D. DENTON ET AL., DEFENDANTS-APPELLANTS (MIDLOTHIAN STATE BANK, TRUSTEE, ET AL., DEFENDANTS-APPELLEES).



Appeal from the Circuit Court of Will County; the Hon. Thomas W. Vinson, Judge, presiding.

PRESIDING JUSTICE STOUDER DELIVERED THE OPINION OF THE COURT:

This action was brought to foreclose a mortgage insured by the United States Department of Housing and Urban Development (H.U.D.). The circuit court of Will County entered judgment in favor of the plaintiff, Bankers Life Company, after striking the first and second affirmative defenses of the defendants, James and Karen Denton.

On December 21, 1981, the plaintiff filed a complaint seeking to foreclose a mortgage given by the defendants to secure a note in the face amount of $27,850. The plaintiff alleged that the defendants had failed to make any payments on the loan since February 1, 1981.

The defendants raised two affirmative defenses to the complaint in their answer. The first affirmative defense alleged the plaintiff's failure to comply with the mortgage servicing requirements contained in 24 C.F.R. sections 203.604 and 203.606, namely, to obtain a face-to-face interview with the defendants before three loan installments had become past due, to seek that face-to-face interview through a certified mail request and a trip to visit the defendants at the mortgaged property, and to review its file to determine compliance with the appropriate servicing requirements.

The second affirmative defense alleged the plaintiff's failure to seek an assignment of the mortgage to H.U.D., indicating that the defendants had met all the requirements for a mandatory assignment as set forth in 24 C.F.R. section 203.650.

The plaintiff, thereafter, moved to strike the affirmative defenses from the answer. The trial court granted that motion and subsequently entered a judgment of foreclosure and sale against the defendants.

The issue which has been presented for our review by the defendants is whether a mortgagor can raise as an affirmative defense to a mortgage foreclosure action involving a mortgage insured by H.U.D., the failure of the mortgagee to comply with certain H.U.D. mortgage servicing requirements contained in the Code of Federal Regulations.

• 1 A motion to strike admits all facts well pleaded. (Sierens v. Clausen (1975), 60 Ill.2d 585, 328 N.E.2d 559.) Thus, for the purpose of determining whether the trial court properly granted the plaintiff's motion to strike, all well-pleaded facts in the affirmative defenses will be taken as true.

The primary cases the defendants cited in support of their contention that the affirmative defenses were improperly striken by the trial court are Thorpe v. Housing Authority (1969), 393 U.S. 268, 21 L.Ed.2d 474, 89 S.Ct. 518, Chicago Housing Authority v. Harris (1971), 49 Ill.2d 274, 275 N.E.2d 353, and Federal National Mortgage Association v. Bryant (1978), 62 Ill. App.3d 25, 378 N.E.2d 333. The defendants argue these cases are authority for the claim that H.U.D. expressly requires compliance with the mortgage servicing requirements contained in the Code of Federal Regulations prior to the commencement of mortgage foreclosure proceedings by virtue of the mandatory language contained in such regulations.

Thorpe v. Housing Authority (1969), 393 U.S. 268, 21 L.Ed.2d 474, 89 S.Ct. 518, involved a H.U.D. circular which stated that before instituting eviction proceedings, local housing authorities operating federally assisted projects should inform the tenant of the reasons for eviction, giving him an opportunity to make a reply or explanation. The United States Supreme Court found that the circular's notification procedure furthered the goals of the Federal housing acts and had been properly imposed upon local housing authorities under H.U.D.'s wholly independent rule-making power. The court viewed the circular's language to be mandatory and held that housing authorities of federally assisted public housing projects must apply the requirements of the circular before eviction proceedings could be commended.

In Chicago Housing Authority v. Harris (1971), 49 Ill.2d 274, 275 N.E.2d 353, the Illinois Supreme Court held that a tenant in a federally assisted public housing project whose lease is subject to termination because of undesirability must be given an administrative hearing upon request in accordance with a grievance procedure set forth in a H.U.D. circular. Again, the court deemed the circular's requirements to be mandatory and part of H.U.D.'s general rule-making authority.

The foreclosure of a H.U.D. insured mortgage was the subject of Federal National Mortgage Association v. Bryant (1978), 62 Ill. App.3d 25, 378 N.E.2d 333. The decision of the court that foreclosure was inappropriate was based upon State statutory and case law and H.U.D. regulations allowing the cure of a default to preclude a foreclosure proceeding.

The language contained in the H.U.D. mortgage servicing requirements cited by the defendants in their affirmative defenses is mandatory and expressly requires compliance. These requirements also have the force and effect of law, having been adopted as regulations pursuant to the authority conferred on H.U.D. by the United States Congress in 12 U.S.C. §§ 1709(a), 1709(b)(1), 1715(b), 1715(u) (1982); and 42 U.S.C. section 3535(d) (1976).

24 C.F.R. section 203.500, entitled "Mortgage servicing generally," states that it is H.U.D.'s intent that no mortgagee commence foreclosure or acquisition of the property until the requirements of sections 203.650 thru 203.662 have been complied with. 24 C.F.R. section 203.650 is entitled "Assignment of ...


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