US Bank loses foreclosure after failing to prove HUD compliance
The borrower flagged the issue from the start. In his answer, he argued the lender never conducted the meeting required by 24 CFR 203.604 – a HUD regulation that, in practice, requires a face-to-face interview with the borrower before the lender can accelerate the debt.
The lower court was not persuaded. In May 2023, the Supreme Court, Nassau County, granted U.S. Bank summary judgment – a ruling without a full trial – struck the borrower’s answer, and appointed a referee to calculate what was owed on the note. The court then confirmed the referee’s report in August 2024, and a judgment of foreclosure and sale was entered the following month, directing the property sold.
The appellate panel saw it differently. All four justices found the borrower’s defense was properly pleaded under CPLR 3015(a), New York’s rule requiring affirmative defenses to be stated with particularity. The key finding: U.S. Bank “failed to establish that it complied with that regulation or that it was exempt from complying with it.”
The reversal sent the case back to the lower court with the borrower’s answer reinstated.
For servicers and lenders, the takeaway is documentation. The burden of proving compliance with 24 CFR 203.604 sits on the lender, not the borrower – and a foreclosure built without that proof, even one that has already reached a sale order, will not survive appeal.
