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FEDERAL NAT. MORTG. ASS'N v. MOORE

May 15, 1985

FEDERAL NATIONAL MORTGAGE ASSOCIATION, PLAINTIFF,
v.
CICERO MOORE, III, SHIRLEY LEE MOORE, FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE IN TRUST DEED DOC. # 25610162, FIRST NATIONAL BANK OF CHICAGO AND GENERAL FINANCE CORP. OF ILLINOIS, DEFENDANTS.



The opinion of the court was delivered by: Moran, District Judge.

MEMORANDUM AND ORDER

I.

Defendants purchased their home on Chicago's South Side in January 1973. The property was secured by a HUD-insured $23,850.00 mortgage, payable in monthly installments over 30 years at 7% interest. The mortgage was subsequently assigned to plaintiff, the Federal National Mortgage Association. Mr. Moore was laid off his job as a steelworker in September 1980. Even though Mr. Moore was unable to obtain a job with comparable wages, defendants continued to make payments for the next two years, although with some difficulty.*fn1

Prompted by a default in the August 1982 payment, the plaintiff had telephone contact in early October 1982 with one of defendants' children and left a message for defendants to contact plaintiff. While this default was cured, defendants failed to make their October 1982 payment and plaintiff contacted Ms. Moore on November 22, 1982, by telephone. In late December 1982 and early January 1983 plaintiffs again had telephone contacts with defendants' children.

Plaintiff also had written contact with defendants. In a December 29, 1982 letter plaintiff advised the defendants that they had failed to make October, November and December payments. The letter advised them that plaintiff was considering defendants' eligibility for an assignment of their mortgage to HUD. An assignment would entitle defendants to forebearance relief, staving off foreclosure. See generally 24 C.F.R. § 203.650-660. In a January 17, 1983 letter plaintiff advised defendants that they did not meet the criteria for a mortgage assignment. The letter stated that defendants had seven days in which to contact HUD and obtain review of this decision.*fn2

The events in February 1983 are somewhat unclear. Defendants sent, and their mortgage company, Union National Bank, accepted, two money orders totalling $621.68. These payments appear to have brought their account current through February 1983.*fn3 The record also contains a February 8, 1983 letter from Union National Bank, rejecting as insufficient two money orders totalling $808.00. The relation between the payment accepted and the payment rejected is unclear.

On March 24, 1983 the defendants' filed a Chapter 13 bankruptcy petition that sought inclusion of "cumulative current mortgage payments." The mortgage company filed a proof of claim on May 25, 1983, indicating that defendants owed them the March, April and May 1983 payments. On May 27, 1983, Bankruptcy Judge Hertz confirmed a plan that stayed foreclosure proceedings and provided for $138.00 in monthly payments. In October 1983 defendants sent the mortgage company $540.00, intending to cover their March and April 1983 payments. They apparently believed that the $138.00 monthly payment under the bankruptcy plan satisfied all their subsequent obligations.

On August 24, 1984, the bankruptcy court granted the mortgage company's motion to modify the automatic stay and allowed foreclosure to proceed. Defendants' offer to enter into a payment plan was rejected on October 2, 1984. This action followed on October 11, 1984.

II.

HUD has promulgated regulations outlining the mortgage servicing responsibilities of mortgagees. 24 C.F.R. § 203.500, et seq. Mortgagees must give mortgagors notice of default:

    The mortgagee shall give notice to each
  mortgagor in default on a form supplied by the
  Secretary or, if a mortgagee wishes to use its own
  form, on a form approved by the Secretary, no
  later than the end of the second month of any
  delinquencies in payments under the mortgage. If
  an account is reinstated and again becomes
  delinquent, the delinquency notice shall be sent
  to the mortgagor again, except the mortgagee is
  not required to send a second delinquency notice
  to the same mortgagor more often than once every
  six months. The mortgagee may issue additional or
  more frequent notices of delinquency at its
  option.

24 C.F.R. § 203.602.

The regulations also require that mortgagees give notice before ...


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