## Facts

- Florence R. Lacy-McKinney financed a home purchase in South Bend, Indiana with an FHA-insured residential mortgage.
- The mortgage incorporated HUD servicing regulations and conditioned acceleration and foreclosure on the lender’s compliance with those regulations.
- Lacy-McKinney defaulted on the loan.
- Taylor, Bean & Whitaker Mortgage Corp. filed a state-court foreclosure action and sought summary judgment.
- Lacy-McKinney asserted that Taylor-Bean failed to complete HUD-required pre-foreclosure servicing and loss-mitigation steps (including efforts toward a face-to-face meeting and consideration of foreclosure alternatives), making foreclosure improper.
- The trial court granted Taylor-Bean summary judgment and entered a foreclosure judgment.

## Issues

1. Whether HUD servicing regulations incorporated into an FHA mortgage are enforceable contractual conditions precedent to acceleration and foreclosure under Indiana law.
2. Whether a genuine dispute over the lender’s compliance with those incorporated HUD requirements precludes summary judgment of foreclosure.

## Decision

- The Indiana Court of Appeals reversed the summary judgment of foreclosure and remanded.
- The court held that the mortgage’s incorporation of HUD servicing regulations made compliance an enforceable contractual condition precedent to acceleration and foreclosure.
- The court held that the record showed a genuine issue of material fact as to whether Taylor-Bean satisfied the HUD pre-foreclosure servicing requirements, making summary judgment improper.

## Legal Principles

- When a mortgage expressly incorporates HUD regulations and conditions acceleration or foreclosure on compliance, those regulations operate as contractual terms enforceable under state contract law.
- A borrower may raise the lender’s noncompliance with incorporated HUD servicing requirements as a defense to foreclosure without establishing an independent private right of action under federal HUD law.
- On summary judgment, a foreclosing lender must establish the absence of any genuine issue of material fact regarding satisfaction of contractual conditions precedent; disputed compliance is material and bars summary judgment.

## Conclusion

Because the FHA mortgage made HUD servicing compliance a contractual precondition to acceleration and foreclosure, and because compliance was factually disputed, the appellate court reversed the foreclosure summary judgment and remanded for further proceedings.


Lacy-McKinney v. Taylor, Bean & Whitaker Mortg. Corp., 937 N.E.2d 853 (Ind. Ct. App. 2010)