Federal Nat. Mortg. Ass'n v. Prior, 85-0487

• Decision Date: 04 December 1985
• Docket Number: No. 85-0487,85-0487
• Citation: 381 N.W.2d 558,128 Wis.2d 182
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff-Respondent, v. Barbara Jean PRIOR, Defendant-Appellant, Milwaukee County, Defendant.
• Court: Wisconsin Court of Appeals

Page 558

381 N.W.2d 558

128 Wis.2d 182

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff-Respondent, v. Barbara Jean PRIOR, Defendant-Appellant, Milwaukee County, Defendant.

No. 85-0487.

Court of Appeals of Wisconsin.

Submitted on Briefs Sept. 4, 1985.

Opinion Released Dec. 4, 1985.

Opinion Filed Dec. 4, 1985.

Gray & End by Thomas D. Jacobs, Milwaukee, for plaintiff-respondent.

James A. Gramling, Jr., Milwaukee, for defendant-appellant.

Before MOSER, P.J., and WEDEMEYER and SULLIVAN, JJ.

SULLIVAN, Judge.

Barbara Jean Prior (Prior) appeals from a summary judgment granted to the Federal National Mortgage Association ^MA in its foreclosure action. Because FNMA's refusal to accept partial payments tendered by Prior is not a defense to foreclosure, we affirm.

On May 26, 1972, Prior executed a purchase money mortgage on a house that was eventually assigned to FNMA. Fleet Mortgage Corporation (Fleet) was FNMA's servicing agent. Because Prior purchased the house under a federal program, FNMA and Fleet were obligated to follow certain HUD regulations. On December 1, 1983, Prior failed to make her required monthly payment. On or about January 14, 1984, Prior tendered the December payment, part of the January payment, and late fees to Fleet at its office. Fleet's employee rejected this tender and demanded the total amount then due. Again, in February of 1984, Prior tendered one half of the arrearage plus late fees. This tender was also rejected by Fleet, and the full amount due was demanded. No payments have been made since November, 1983. FNMA commenced this action to foreclose on the mortgage due to Prior's default. The trial court granted summary judgment in favor of FNMA and Prior appeals.

The issue on appeal is whether the trial court erred in granting summary judgment for FNMA, despite FNMA's violation of a HUD regulation requiring acceptance of a partial payment by a mortgagor. See 24 C.F.R. § 203.556. ¹ In reviewing a trial court's grant of summary judgment, this court applies the standards of sec. 802.08(2), Stats., in the same manner as the trial court. Gordon v. Milwaukee County, 125 Wis.2d 62, 70, 370 N.W.2d 803, 807 (Ct.App.1985). Summary judgment should be granted only when there appears on the record to be no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Id. There is no factual dispute here. Whether the mortgagee's violation of HUD's partial payment regulation is a defense to foreclosure is a question of law. As such, we must decide it independently without deference to the decision of the trial court. Ball v. District No. 4 Area Board, 117 Wis.2d 529, 537, 345 N.W.2d 389, 394 (1984).

Section 203.606 requires the mortgagee to ensure that all servicing requirements of this subpart have been met before initiating foreclosure. 24 C.F.R. § 203.606. It is undisputed that Fleet, FNMA's agent, refused Prior's partial payments in violation of 24 C.F.R. § 203.556. Thus, argues Prior, Fleet's violation of the servicing requirement in sec. 203.556 bars FNMA from initiating foreclosure.

Prior, however, mischaracterizes HUD's mortgage servicing requirements. The HUD requirements regulate the relationship between the mortgagee and the federal government, not between the mortgagee and the mortgagor. If a mortgagee repeatedly violates the servicing requirements, it may be withdrawn from HUD's mortgage insurance program. 24 C.F.R. § 203.500. ²

HUD recognizes that violations of certain regulations may be defenses to foreclosure: 24 C.F.R. § 203.500 states that HUD "takes no position on whether a mortgagee's refusal or failure to comply with §§ 203.650-203.662 is a legal defense to foreclosure; that is a matter to be determined by the courts." Those C.F.R. sections, however, deal with the assignment of a HUD-insured mortgage. We find it significant that 24 C.F.R. § 203.500 does not similarly recognize that a violation of sec. 203.556 may also be a legal defense to foreclosure.

We conclude that a mortgagee's violation of 24 C.F.R. § 203.556 does not create a remedy in the mortgagor. Rather, the remedy lies with the federal government, which may drop the errant mortgagee from the program. The mortgagor-mortgagee relationship is neither governed nor affected by the mortgage servicing requirements in sec. 203.556.

A similar result was reached in Roberts v. Cameron-Brown Co., 556 F.2d 356 (5th Cir.1977). The Roberts court held that the mortgagor could not assert the mortgagee's violation of a HUD regulation as a defense to foreclosure. The court pointed out that the regulations promulgated under the National Housing Act "deal only with the relations between the mortgagee and the government, and give the mortgagor no claim to duty owed nor remedy for failure to follow." Id. at 360 (citation omitted).

Thus, we conclude that FNMA's violation of 24 C.F.R. § 203.556 is irrelevant to the mortgagor-mortgagee relationship between Prior and FNMA. In addition, neither Wisconsin law nor the mortgage and note signed by Prior require FNMA to accept partial mortgage payments before foreclosure. For the foregoing reasons, we conclude that FNMA was entitled to judgment as a matter of law and we therefore affirm the trial court's judgment granting...