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GRASTY v. UNITED STATES HUD

August 8, 1985

CARLOS GRASTY
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; SAMUEL R. PIERCE, JR., SECRETARY OF U.S. DEPT. OF HUD; JOSEPH RUSSELL, CHIEF LOAN MANAGEMENT BRANCH, PHILADELPHIA AREA OFFICE; AND FIDELITY BOND & MORTGAGE CO.



The opinion of the court was delivered by: HANNUM

HANNUM, S.J.

 MEMORANDUM AND ORDER

 Plaintiff Carlos Grasty initiated this action seeking judicial review of the final decision of the United States Department of Housing and Urban Development (HUD) in which HUD refused to accept the assignment of his mortgage on the basis of its conclusion that he did not meet two of the six conditions required by 24 C.F.R. § 203.650(a). *fn1" Presently before the Court are cross-motions for summary judgment filed by the plaintiff and defendants HUD, Samuel R. Pierce, Jr. and Joseph Russell.

 The Secretary of HUD is authorized pursuant to 12 U.S.C. § 1715 u(b) (1) to acquire certain federally insured mortgages in order to avoid foreclosure and has promulgated regulations at 24 C.F.R. §§ 203.650 - 203.660 under the heading "Assignment of Mortgages to HUD" which implement this statute. Section 203.650(a) provides that the Secretary will accept assignment of certain federally insured mortgages when the following six conditions are met:

 
(1) The mortgagee has informed the mortgagor that it intends to foreclose the mortgage.
 
(2) At least three full monthly installments due on the mortgage are unpaid after application of any partial payments which may have been accepted but not yet applied to the mortgage account.
 
(3) The property is the mortgagor's principal place of residence. This criterion may be waived by the Secretary if the property has been leased or rented and the rental income has been applied to the mortgage delinquency or to effect repairs necessary to maintain the property in a safe and habitable condition or if such waiver is determined to be in the best interests of the Department.
 
(4) The mortgagor does not own other property subject to a mortgage insured or held by the Secretary. This criterion may be waived by the Secretary if the income from such other property is the mortgagor's principal source of income.
 
(5) The mortgagor's default has been caused by circumstances beyond the mortgagor's control which render the mortgagor unable to correct the delinquency within a reasonable time or make full mortgage payments.
 
(6) There is reasonable prospect that the mortgagor will be able to resume full mortgage payments after a period of reduced or suspended payments not exceeding 36 months and will be able to pay the mortgage in full by its maturity date extended, if necessary, by up to ten years.

 In the case presently before the Court, HUD found that conditions five and six were not met.

 II. Factual Background

 Plaintiff purchased a home in 1978 located at 237 East 22nd Street in Chester, Pennsylvania. The mortgage on the home is insured by HUD and the mortgagee is defendant Fidelity. On April 13, 1984, the plaintiff made a mortgage payment which defendant Fidelity subsequently credited as the plaintiff's February 1, 1984 payment after learning that the check tendered by the plaintiff on April 3, 1984 to cover his February and March mortgage payments was not secured by sufficient funds. The record does not show another mortgage payment by the plaintiff after the payment credited by defendant Fidelity as covering the amount due on February 1, 1984.

 Defendant Fidelity wrote to the plaintiff on May 18, 1984 giving him a preliminary notice as required by 24 C.F.R. § 203.651. The letter informed the plaintiff that his mortgage was in serious default and that foreclosure proceedings would be initiated unless he cured the default by immediately paying the $1,119.16 which he owed or by making other "acceptable arrangements." The letter also explained that the plaintiff might be eligible for an assignment of his mortgage to HUD if the default was caused by circumstances beyond his control and that defendant Fidelity was considering whether or not to request HUD to accept assignment of the mortgage.

 A second letter as required by 24 C.F.R. § 203.652 was sent by defendant Fidelity to the plaintiff on June 14, 1984 notifying him of defendant Fidelity's determination that it would not ask HUD to accept assignment of the mortgage because "we do not believe the default is due to circumstances beyond your control nor do we believe there is [a] reasonable prospect for the resumption of regular payments." It was further noted in the letter that the plaintiff could "appeal" defendant Fidelity's decision that he was not eligible for the assignment program by contacting HUD within fifteen days from June 14, 1984 and that defendant ...


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