Opinion ID: 466307
Heading Depth: 2
Heading Rank: 2

Heading: Calculating the Date of Default

Text: 11 This contempt citation evolved from a controversy over how HUD figured a mortgagor's date of default. Section 1715u authorizes HUD to acquire mortgages in default by paying the mortgagees the unpaid balance of the loan and receiving an assignment of the loan. HUD would then arrange a new payment plan with the mortgagor on more favorable terms, such as lower monthly payments or a suspension of payments for up to thirty-six months until the mortgagor was financially able to resume full payments. To be eligible for this program, the mortgagor had to meet certain criteria, one of which was that [t]he default must have been caused by a circumstance or set of circumstances beyond the mortgagor's control which temporarily renders the family financially unable to cure the delinquency within a reasonable time or make full mortgage payments. HUD Notice 76-43 at p 3(e) (incorporated into the 1976 consent decree). 12 The HUD Notice gave examples of circumstances that satisfied this criterion, but neither HUD Notice 76-43 nor Mortgagee Letter 76-9 (also incorporated into the 1976 consent decree) clearly specified how HUD should calculate when the necessary circumstances and the default itself had occurred. In the not uncommon situation where a mortgagor defaults more than once (i.e., fails to make a full mortgage payment within thirty days of the due date more than once), the documents incorporated into the 1976 consent decree, and the subsequent 1979 amended decree, did not clearly specify which date HUD should use as the date of default. 13 The following hypothetical illustrates how the dispute over the proper date of default may arise. Prior to January 1, 1980, mortgagor M is current. Beginning on January 1, 1980, M is more than thirty days late on all payments for the next three years, making only twenty-four of the thirty-six payments. On July 1, 1981, M loses his job (a circumstance qualifying him for the mortgage assistance program). If January 31, 1980, is M 's date of default, he is not eligible for the assistance program, because the default occurred prior to his job loss. If, however, M can advance his date of default by counting his twenty-four late payments, his date of default becomes January 31, 1982, which comes after his July 1, 1981 job loss, and M is eligible for the assignment program. 14 HUD, prior to the district court's 1983 decision, had determined the date of default at thirty days following the first missed payment after the account had been current for at least two months. In our example, using its two-month rule, HUD would look at M 's circumstances occurring prior to January 31, 1980. 15 The district court, however, rejected HUD's rule and accepted the plaintiffs' argument that HUD should use an advancement rule, i.e., advance the date of default by giving the mortgagor full credit for all late payments. In our example, under the advancement rule, HUD would look at M 's circumstances occurring prior to January 31, 1982. Therefore, under the advancement rule the district court would require HUD to consider the job loss on July 1, 1981, to be the cause of M 's default.