In PennyMac Loan Services LLC v. Ustarez, the Fourth 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 §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. Because the provision in the PennyMac Note and Mortgage 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 before accelerating and foreclosing.
Accordingly, compliance with HUD regulations was required prior to initiating the foreclosure. Notably, the decision made clear that in the absence of a contractual provision expressly incorporating HUD regulations, §203.604(b) would not act as a condition precedent to foreclosure, but merely an administrative regulation subject to monetary sanction.
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