The opinion
FOR PUBLICATION
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE:
GREGORY A. STOUT DAVID PESEL
Reisenfeld & Associates, LPA LLC MARCY WENZLER
Cincinnati, Ohio Indiana Legal Services, Inc.
Bloomington, Indiana
FILED
Apr 05 2012, 9:01 am
IN THE
COURT OF APPEALS OF INDIANA CLERK
of the supreme court,
court of appeals and
tax court
GMAC MORTGAGE, LLC, )
)
Appellant-Plaintiff, )
)
vs. ) No. 28A04-1107-MF-404
)
RONALD GLENN DYER, )
)
Appellee-Defendant. )
)
APPEAL FROM THE GREENE SUPERIOR COURT
The Honorable Dena A. Martin, Judge
Cause No. 28D01-1001-MF-33
April 5, 2012
OPINION - FOR PUBLICATION
VAIDIK, Judge
Case Summary
Ronald Glenn Dyer had an FHA-insured loan that he defaulted on. Dyer and
GMAC Mortgage, LLC, attended a settlement conference at which they agreed to
proceed with a deed in lieu of foreclosure. After the settlement conference, GMAC
drafted a written agreement. The agreement included a provision using language
required by the U.S. Department of Housing and Urban Development (HUD) that neither
GMAC nor HUD would pursue a deficiency judgment against Dyer. Dyer, however, was
not happy with this provision because he did not think that it gave him enough protection.
Accordingly, he refused to sign the agreement. Instead, Dyer wanted the agreement to
provide that he was released from all personal liability. The trial court agreed with Dyer
and ordered GMAC to rewrite the agreement. Because under federal law and HUD
regulations deeds in lieu of foreclosure release the borrower from any obligation under
the mortgage, the standard language used by GMAC was sufficient to release Dyer from
all personal liability. We therefore reverse the trial court.
Facts and Procedural History
On November 14, 2008, Dyer and his now-deceased wife Ella Faye Dyer1
executed a note in the principal amount of $74,277.00 with Lend America for their
Greene County, Indiana, home. The loan was an FHA-insured loan subject to federal
statutes and HUD regulations. To secure payment of the note, Dyer and his wife
executed a mortgage. The mortgage was eventually assigned to GMAC. Dyer later
defaulted under the terms of the note and mortgage.
1
The record shows that Dyer’s wife passed away on November 19, 2009.
2
On January 19, 2010, GMAC filed a Complaint on Note and to Foreclose
Mortgage. Dyer filed an answer and counterclaim, and GMAC filed an answer to Dyer’s
counterclaim. In addition, GMAC informed Dyer of his right to participate in a
settlement conference, which is now required by Indiana law. See Ind. Code § 32-30-
10.5-8. Dyer requested a settlement conference,2 and the trial court scheduled one for
June 24, 2010. See id. § 32-30-10.5-10.
At the settlement conference, the parties decided to proceed with a deed in lieu of
foreclosure. This is one of many options available to a defaulting homeowner. As one
treatise explains:
Often the parties to a mortgage prefer to avoid normal foreclosure
procedures. This can be accomplished if the mortgagor is willing to convey
the secured property to the mortgagee as a substitute for foreclosure. In
turn, the mortgagor in default is completely excused from the underlying
obligation. The parties cannot promise in the original note and mortgage
documents to resolve a default in this manner. Any such provision would
be an unacceptable clog on the mortgagor’s equity of redemption. After
default occurs, however, the parties are permitted to resolve their
relationship by means of a deed in lieu of foreclosure.
2
The Indiana Supreme Court has provided a great resource for help with mortgage foreclosures,
settlement conferences, and deeds in lieu of foreclosure. See Indiana Supreme Court, Help with Mortgage
Foreclosures, http://www.in.gov/judiciary/self-service/2359/htm (last visited Mar. 2, 2012). Specifically,
A settlement conference is a face-to-face meeting with your lender’s representative. It is
your last chance to work out a deal with your lender before a foreclosure takes place. If a
foreclosure takes place, you will lose your home and your credit rating will be damaged.
However, a settlement conference is not a guaranteed workout between you and your
lender!
Id.
3
4 Powell on Real Property § 37.44[1] (Michael Allan Wolf ed., 1997) (footnotes
omitted).3
On December 30, 2010, GMAC sent Dyer a deed in lieu of foreclosure agreement
to sign and return. Appellant’s App. p. 113.4 The agreement provided, in pertinent part:
10. Provided all terms and conditions of this Agreement are met and this
transaction concluded, GMAC Mortgage, LLC, agrees that neither it nor
the U.S. Department of Housing and Urban Development [will] pursue a
deficiency judgment from the Mortgagor.
Id. at 118. GMAC gave Dyer a January 10, 2011, deadline. Id. at 113. Because Dyer
did not believe that paragraph 10 released him from personal liability nor complied with
HUD regulations, he never signed and returned the agreement.
Instead, on February 4, 2011, Dyer requested leave to supplement his answer to
GMAC’s complaint as well as a declaratory judgment. Id. at 48. The request provides,
in relevant part:
8. On June 24, 2010, the Plaintiff and Mr. Dyer had a settlement conference
pursuant to I.C. 32-30-10.5-8(c) by telephone. The Plaintiff agreed to
accept a deed in lieu of foreclosure from Mr. Dyer in exchange for a release
of personal liability.
9. On September 17, 2010, Mr. Dyer’s counsel, by email, confirmed Mr.
Dyer’s agreement to move out of his home in exchange for delivering a
3
According to our Supreme Court’s website, borrowers who do not want to keep their home may
pursue a deed in lieu of foreclosure. A deed in lieu of foreclosure allows:
Giving the home back to the lender; owner is allowed to walk away from the
home with permission of the lender
Helps avoid damage to credit caused by foreclosure/bankruptcy.
See supra note 2.
We actually refer to Appellant’s Amended Appendix, but for the sake of simplicity we cite it as
4
“Appellant’s App.”
4
deed in lieu of foreclosure including a specific waiver of any deficiency
owed.
10. On September 20, 2010, Matt Wach, a Legal Loss Mitigation Analyst
for GMAC, by email, agreed to the confirmation.
11. On October 4, 2010, in reliance on Plaintiff’s agreement to accept a
deed in lieu of foreclosure that released him from liability, Mr. Dyer moved
out of his home of 21 years.
12. Plaintiff delayed until November 30, 2010 to send to Mr. Dyer drafts of
Plaintiff’s deed in lieu documents which consisted of an Agreement (setting
forth terms of the deed in lieu arrangement), a General Warranty Deed, an
Estoppel Affidavit and (a later emailed) Conditional Delivery of Deed
(hereinafter, collectively the “DIL Documents”).
13. The DIL Documents provided by the Plaintiff do not release Mr. Dyer
from personal liability.
14. The DIL Documents including this misleading provision about not
pursuing a deficiency judgment:
Provided all terms and conditions of this Agreement are met and this
transaction concluded, GMAC Mortgage, LLC agrees that neither it nor the
U.S. Department of Housing and Urban Development [will] pursue a
deficiency judgment from the Mortgagor.
15. The above provision is misleading because pursuant to The Deficit
Reduction Act of 1984 . . ., HUD does not need to get a deficiency
judgment to collect from Mr. Dyer.
16. Mr. Dyer’s counsel, by email of January 10, 2011, notified Plaintiff that
the DIL Documents were unsatisfactory and did not conform to HUD’s
requirements.
Id. at 49-51.
A few days later, GMAC filed a Supplemental Report of Settlement Conference
Results and Motion to Proceed with Foreclosure. Id. at 46. GMAC’s report advised the
court
5
that a telephonic Settlement Conference was held on June 24, 2010, in
which Plaintiff, by counsel, and Defendant, Ronald Glenn Dyer
individually and by counsel, appeared. The parties hereto attempted to
negotiate a Deed-In-Lieu of foreclosure, however an agreement was never
reached on the terms.
Therefore, the Settlement Conference has resulted in no agreement
or resolution and Plaintiff moves the Court for permission to proceed with
the foreclosure action.
Id.
The trial court held a telephonic conference to address the motions and granted
Dyer’s request for leave to supplement his answer. Id. at vi (CCS).5 The court gave
GMAC a deadline to respond. Id.
On the deadline, GMAC filed its response to Dyer’s request for leave to
supplement its answer and request for declaratory judgment. Id. at 36. In its response,
GMAC alleged that contrary to Dyer’s allegations, it had “complied with all applicable
HUD regulations” and therefore GMAC “should not be compelled to reform their Deed
in Lieu Agreement for the Defendant.” Id. GMAC asked the court to enforce the
agreement the parties had already reached:
In his Request for Declaratory Judgment, Defendant requests that this Court
order the Plaintiff to add language to their Deed in Lieu Agreement stating
that the Plaintiff has released Defendant from personal liability. Because
the requested language is repetitive and unnecessary, Plaintiff requests that
this Court deny the Defendant’s Request, and allow the Plaintiff and
Defendant to proceed with the agreed-upon resolution of this case.
Id. (emphasis added) (footnote omitted); see also id. at 39 (“Plaintiff prays that the Court
find the Defendant’s Request for Declaratory Judgment unpersuasive and allow the deed
in lieu process to advance . . . .”).
5
GMAC did not number the CCS included at the beginning of its Appendix. It started using
roman numerals but stopped at iii. We use the corresponding roman numeral as if the numbering had
continued.
6
On April 15, 2011, Dyer filed a motion for judgment on the pleadings pursuant to
Indiana Trial Rule 12(C). The trial court granted Dyer’s motion four days later. The
order provides:
The Court, having considered the same, now grants the Defendant’s
Motion, and declares:
1. The Plaintiff has not complied with HUD’s deed in lieu loss
mitigation requirements.
2. The deed in lieu agreement is a release from all personal liability
of Defendant in connection with the Note and Mortgage at issue.
The Court orders the Plaintiff:
1. [W]ithin thirty (30) days of this Order, to deliver to Defendant’s
counsel the Deed in Lieu documents and include in the Deed in Lieu
Agreement the following additional language:
Upon execution and delivery by Mortgagor to GMAC
Mortgage, LLC of the documents referenced herein, the
Mortgagor is released from all personal liability in connection
with the Note and Mortgage.
2. Within fifteen (15) days of receipt of the Deed in Lieu documents
executed by Defendant, Plaintiff shall deliver to Defendant’s
counsel:
a. fully executed copies of the Deed in Lieu documents, and
b. a certified, file-stamped copy of the deed indicating its
recordation with the Greene County Recorder’s Office.
Id. at 24-25. Although the trial court’s order does not say, the CCS entry explains that
the trial court treated Dyer’s motion for judgment on the pleadings as a motion for
summary judgment. Id. at vi.
Apparently unaware that the trial court had already ruled, see Appellant’s
Amended Br. p. 7, GMAC filed a response to Dyer’s motion for judgment on the
pleadings two weeks later.
7
GMAC filed a motion to correct error, which the trial court denied. GMAC now
appeals.
Discussion and Decision
GMAC contends that the trial court improperly granted Dyer’s motion for
judgment on the pleadings. As indicated above, however, the trial court treated Dyer’s
motion as one for summary judgment. See Ind. Trial Rule 12(C) (“If, on a motion for
judgment on the pleadings, matters outside the pleadings are presented to and not
excluded by the court, the motion shall be treated as one for summary judgment and
disposed of as provided in Rule 56 . . . .”). We thus apply the summary judgment
standard of review.6
When reviewing the entry or denial of summary judgment, our standard of review
is the same as that of the trial court: summary judgment is appropriate only where there is
no genuine issue of material fact and the moving party is entitled to a judgment as a
matter of law. Ind. Trial Rule 56(C); Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904
N.E.2d 1267, 1269 (Ind. 2009). All facts established by the designated evidence, and all
reasonable inferences from them, are to be construed in favor of the nonmoving party.
Naugle v. Beech Grove City Sch., 864 N.E.2d 1058, 1062 (Ind. 2007).
6
The record is also clear that the parties asked the trial court to enforce their deed in lieu of
foreclosure agreement. See Appellant’s App. p. 36 (“Because the requested language is repetitive and
unnecessary, Plaintiff requests that this Court deny the Defendant’s Request, and allow the Plaintiff and
Defendant to proceed with the agreed-upon resolution of this case.”), 39 (“Plaintiff prays that the Court
find the Defendant’s Request for Declaratory Judgment unpersuasive and allow the deed in lieu process
to advance as the Plaintiff has fully complied with all HUD regulations and has graciously offered the
Defendant a more favorable solution to its default than the Plaintiff’s contractual right of foreclosure.”)
(emphases added). And both parties address motions to enforce settlement agreements on appeal. Even if
we addressed this case as a motion to enforcement a settlement agreement, our result would be the same.
8
The facts are not in dispute. Importantly, the record shows that Dyer and GMAC
agree upon several things. First, Dyer and GMAC agree that they decided to proceed
with a deed in lieu of foreclosure at the settlement conference. See Appellant’s Reply Br.
p. 5 (“The record before the trial court is clear; the parties attended a settlement
conference and agreed to allow a deed in lieu of foreclosure on the property.”);
Appellee’s Br. p. 8 (“The parties agreed to resolve this foreclosure by the FHA loss
mitigation option known as deed in lieu of foreclosure . . . .”). Second, both parties agree
that a deficiency judgment cannot be sought against Dyer. Third, both parties agree that
Dyer may not be held personally liable for any deficiency. Finally, both parties agree
that the deed in lieu of foreclosure agreement must comply with federal law and HUD
regulations. Their point of contention is the exact language that must be included in the
deed in lieu of foreclosure agreement and whether the language used accomplishes their
joint purpose of ensuring that Dyer is not held personally liable for any deficiency.
Accordingly, we must determine whether GMAC’s deed in lieu of foreclosure agreement
precludes personal liability of Dyer under federal law and HUD regulations. The trial
court agreed with Dyer, but we agree with GMAC.
Federal law provides protection to defaulting borrowers with FHA-insured loans
with HUD’s Loss Mitigation Program. 12 U.S.C.A. § 1715u(a) (Supp. 2011) provides
that upon default or imminent default, “mortgagees shall engage in loss mitigation
actions for the purpose of providing an alternative to foreclosure (including but not
limited to actions such as . . . deeds in lieu of foreclosure . . . .”). In addition, 24 C.F.R. §
203.501 (2011) provides that “[m]ortgagees must consider the comparative effects of
9
their elective servicing actions, and must take those appropriate actions which can
reasonably be expected to generate the smallest financial loss to the Department. Such
actions include, but are not limited to, deeds in lieu of foreclosure under § 203.357 . . . .”
24 C.F.R. § 203.357 (2011), in turn, sets forth the requirements for a deed in lieu of
foreclosure:
(a) Mortgagors owning one property. In lieu of instituting or completing a
foreclosure, the mortgagee may acquire property from one other than a
corporate mortgagor by voluntary conveyance from the mortgagor who
certifies that he does not own any other property subject to a mortgage
insured or held by FHA. Conveyance of the property by deed in lieu of
foreclosure is approved subject to the following requirements:
(1) The mortgage is in default at the time the deed is executed and
delivered;
(2) The credit instrument is cancelled and surrendered to the
mortgagor;
(3) The mortgage is satisfied of record as a part of the consideration
for such conveyance;
(4) The deed from the mortgagor contains a covenant which
warrants against the acts of the grantor and all claiming by, through,
or under him and conveys good marketable title;
(5) The mortgagee transfers to the Commissioner good marketable
title accompanied by satisfactory title evidence.
According to HUD, “The Deed-in-Lieu of Foreclosure allows a mortgagor in
default, who does not qualify for any other HUD Loss Mitigation option, to sign the
house back over to the mortgage company. Ref: Mortgagee Letters 2000-05 and 2002-
13.” U.S. Department of Housing and Urban Development, Deed-in-Lieu of Foreclosure
Option, http://portal.hud.gov/fha/sf/svc/faqdilfact.pdf. The specific requirements include
an “[a]cknowledgment that mortgagor(s) who complies with all of the requirements of
the Agreement shall not be pursued for deficiency judgments.” Id. As noted above, this
document references Mortgagee Letter 00-05, which HUD issued on January 19, 2000.
10
The purpose of Mortgagee Letter 00-05 “is to announce clarifications of policy and
procedural changes in FHA’s Loss Mitigation Program and provide an updated
consolidation of the existing program guidance.” U.S. Department of Housing and Urban
Development, Mortgagee Letter 00-05 (Jan. 19, 2000),
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/nsc/lmmltrs
(follow 00-05 hyperlink). This letter provides:
Deed-in-lieu of foreclosure (DIL) is a disposition option in which a
borrower voluntarily deeds collateral property to HUD in exchange for a
release from all obligations under the mortgage. Though this option results
in the borrower losing the property, it is usually preferable to foreclosure
because the borrower mitigates the cost and emotional trauma of
foreclosure and is eligible to receive borrower’s consideration of $500.[7]
Also, a DIL is generally less damaging than foreclosure to a borrower’s
ability to obtain credit in the future. DIL is preferred by HUD because it
avoids the time and expense of a legal foreclosure action, and due to the
cooperative nature of the transaction, the property is generally in better
physical condition at acquisition.
Id. at 35 (emphasis added). In addition, the letter explains that the lender and mortgagor
must execute a written deed in lieu of foreclosure agreement that contains all of the
conditions under which the deed will be accepted, including an “[a]cknowledgment that
borrowers who comply with all of the requirements of the agreement shall not be pursued
for deficiency judgments.” Id. at 37.
HUD regulations are clear: a deed in lieu of foreclosure releases the borrower
from all obligations under the mortgage and the deed in lieu of foreclosure written
agreement must contain an acknowledgement that the borrower shall not be pursued for
deficiency judgments. GMAC’s proposed agreement contains the precise language
7
This amount has since been increased to $2000.
11
required by HUD. Accordingly, GMAC’s proposed agreement releases Dyer from all
obligations under the mortgage. See Mortgagee Letter 00-05 at 35 (“Deed-in-lieu of
foreclosure (DIL) is a disposition option in which a borrower voluntarily deeds collateral
property to HUD in exchange for a release from all obligations under the mortgage.”
(emphasis added)). Further, a deed in lieu of foreclosure alone releases Dyer from all
obligations under the mortgage. This is in line with hornbook law, which explains that a
deed in lieu of foreclosure allows “default without incurring personal liability on the
note.” 4 Powell on Real Property § 37.44[1].
Nevertheless, Dyer relies on a single federal district court opinion from 1999,
Ingram v. Cuomo, 51 F. Supp. 2d 667 (M.D. N.C. 1999), as support that the “shall not be
pursued for deficiency judgments” language is not protective enough because HUD may
be able to intercept any future tax refund due to Dyer, even without a deficiency
judgment, pursuant to the Deficit Reduction Act of 1984. We first note that Ingram came
before Mortgagee Letter 00-05. Moreover, Ingram does not apply to the facts in this
case. In Ingram, the borrower defaulted on her FHA-insured loan, the home was sold at a
loss, and HUD sent the borrower notice that it intended to intercept any tax refund due to
her in order to satisfy the balance owed. Id. at 669. In this case, however, Dyer and
GMAC avoided foreclosure by agreeing to proceed with a deed in lieu of foreclosure.
This type of agreement clearly provides that the borrower cannot be pursued for
deficiency judgments. Accordingly, Ingram does not impact the language that must be
included in a deed in lieu of foreclosure agreement.
12
Because GMAC’s proposed deed in lieu of foreclosure agreement releases Dyer
from all personal liability and complies with HUD regulations, we reverse the trial
court’s summary judgment order that GMAC did not comply with HUD regulations and
therefore must revise the agreement. As a result, the parties shall proceed with the deed
in lieu of foreclosure agreement as proposed by GMAC.
Reversed and remanded.
NAJAM, J., concurs.
ROBB, C.J., concurs in part, dissents in part with separate opinion.
13
IN THE
COURT OF APPEALS OF INDIANA
GMAC Mortgage, LLC, )
)
Appellant-Plaintiff, )
)
vs. ) No. 28A04-1107-MF-404
)
RONALD GLENN DYER )
)
Appellee-Defendant. )
ROBB, Chief Judge, concurring in part, dissenting in part
I concur in the majority’s determination that a deed in lieu of foreclosure releases
a borrower from any obligation under a mortgage pursuant to federal law and HUD
regulations. However, I respectfully dissent from the majority’s resolution of the case.
The majority laid out several facts that are not in dispute. Both parties agree they
decided to pursue a deed in lieu of foreclosure after attending a settlement conference, a
deficiency judgment cannot be sought against Dyer, Dyer cannot be held personally
liable, and the deed in lieu of foreclosure must comply with federal law and HUD
regulations. See slip op. at 9. At issue is Dyer’s request to have a provision in the deed
in lieu of foreclosure agreement stating he is released from personal liability. GMAC
contends the provision it included in its draft of the agreement stating neither GMAC nor
HUD will pursue a deficiency judgment from Dyer is sufficient.
14
Although I find no reason to disagree with the majority that a deed in lieu of
foreclosure releases a borrower from liability as a matter of law,8 what would be the harm
in including Dyer’s requested provision? If a deed in lieu of foreclosure does in fact
release a mortgagor from personal liability and if everyone agrees Dyer should be
released from personal liability, the requested provision would only clarify this reality.
HUD regulations do not prohibit parties adding language in addition to what is required,
and Dyer is not attempting to remove a provision required by HUD. For these reasons, I
would affirm the trial court’s grant of summary judgment requiring a revision of the
agreement to include Dyer’s requested provision. In all other respects, I concur with the
majority.
8
It is worth noting, however, that GMAC chose to litigate against Dyer’s requested provision
rather than merely agreeing to its addition to the agreement. While GMAC certainly had the right to
respond to Dyer’s request for declaratory judgment and argue its drafted agreement was sufficient, this
route would almost certainly be less cost-effective. If GMAC truly intends to not hold Dyer personally
liable in any manner, this extra cost would serve no purpose.
15