## Facts

- Ronald Glenn Dyer defaulted on an FHA-insured residential mortgage that had been assigned to GMAC Mortgage, LLC.
- GMAC filed a mortgage-foreclosure action in an Indiana trial court.
- The parties participated in a court-ordered foreclosure settlement conference and agreed to resolve the case through a deed in lieu of foreclosure.
- GMAC drafted a deed-in-lieu agreement using HUD-required language for FHA loans, including a provision that neither GMAC nor HUD would “pursue a deficiency judgment” against Dyer.
- Dyer refused to sign, asserting the “no deficiency judgment” wording might still permit other forms of collection and demanding language stating he was released from all personal liability connected to the mortgage.
- The trial court ordered GMAC to rewrite the agreement to state that execution of the deed would release Dyer “from all liability in connection with” the mortgage, in addition to the HUD language.
- GMAC appealed, contending the HUD-compliant language was legally sufficient under federal law and HUD regulations.

## Issues

1. Whether federal law and HUD regulations governing FHA-insured mortgages determine that a deed in lieu of foreclosure releases the borrower from all personal liability under the mortgage.
2. Whether a state court may require a lender to add release language beyond HUD-required deed-in-lieu terms on an FHA-insured loan.

## Decision

- The Indiana Court of Appeals reversed the trial court’s order.
- The court held that, under federal law and HUD regulations, a properly executed deed in lieu of foreclosure on an FHA-insured mortgage releases the borrower from any obligation under the mortgage.
- The HUD-standard “no deficiency judgment” provision was sufficient to effect a full release of Dyer’s personal liability; the trial court erred by ordering additional release language.
- The case was remanded for further proceedings consistent with the appellate ruling.

## Legal Principles

- Federal statutes and HUD regulations governing FHA-insured mortgages control the legal effect of a deed in lieu of foreclosure.
- Where HUD’s regulatory scheme provides that a deed in lieu releases the borrower from obligations under the mortgage, state courts may not impose additional drafting requirements to create or confirm that release.
- HUD-required deed-in-lieu provisions barring pursuit of a deficiency judgment, when read within the FHA/HUD framework, operate as a complete release of mortgage-related personal liability.

## Conclusion

The appellate court concluded that HUD-compliant deed-in-lieu language for an FHA-insured mortgage already extinguishes the borrower’s personal liability, so a state trial court cannot require broader release wording as a condition of enforcing the settlement.


GMAC Mortg., LLC v. Dyer, 965 N.E.2d 762 (Ind. Ct. App. 2012)