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74 It is common knowledge that mortgage foreclosures have decreased significantly in the last year. is decline has not only impacted mortgage foreclosure law firms throughout the country but has also had an effect on the cottage industry of "foreclosure defense." e small boutique firms and solo practitioners that engage in foreclosure defense have seen their pool of clients shrink significantly and many are moving out of the practice area. As defense counsels compete for clients, one of the most recent and effective strategies to prolong foreclosure actions is alleging failure to comply with borrower counseling requirements on FHA loans as mandated by HUD regulations. A substantial factor contributing to the success of this tactic is that the judiciary is widely split on how to treat these allegations. WHAT IS HUD COUNSELING? Borrowers alleging failure to comply with HUD regulations typically will cite to either 12 U.S.C. §1701x(c)(5) or 24 CFR §203.604. Motions for Summary Judgment and Answer and Affirmative Defenses many times will reference face-to-face meetings and HUD counseling interchangeably. It is important to note that HUD counseling requirements will typically be misquoted by borrowers, perhaps understandably so. e National Housing Act is found at 12 U.S.C. §1701, et seq. with accompanying regulations promulgated under Title 24: Housing and Urban Development. Both the National Housing Act and Title 24 are extremely lengthy and encompass a wide variety of issues. Section 1701x deals mainly with notification and eligibility counseling requirements for low to moderate income families, while 24 C.F.R §203.604 sets out more specific guidelines as to when contact with the mortgagor must occur. Nothing in either section actually indicates that "HUD counseling" must take place. Instead, §203.604 simply indicates that the mortgagee must have a "face-to-face interview" with the borrower. e National Housing Act authorizes the Secretary of HUD to, "make grants to nonprofit organizations experienced in the provision of homeownership counseling… and to assist in the establishment of nonprofit homeownership counseling organizations." e National Housing Act defines home ownership counseling as, "counseling related to homeownership and residential mortgage loans." e Act outlines clear criteria that a homeowner must meet in order to be eligible for counseling: 1) the home must be their primary residence, not assisted; 2) the inability to make payments is due to involuntary loss of income due to death, divorce, involuntary job loss, a significant increase in basic expenses due to divorce, damage, or repair to the property, large property tax increase, or increased medical expenses, and 3) the homeowner's income must not exceed the threshold established by HUD as low to moderate income. e Act requires notification of availability of homeownership counseling, "to any eligible homeowner who fails to pay any amount by the date the amount is due under a home loan." e notification under the Act is required within 45 days of failure to make a payment due. Generally all that is required is that the notice inform the homeowner that "homeownership counseling" is offered by the creditor, a nonprofit organization, or that they can attain a list of nonprofit organizations offering counseling by calling a toll free number for HUD. Most notices of default either include information regarding counseling organizations or provide the toll free number for HUD, which is sufficient to show compliance. I N D U S T R Y I N S I G H T / M I C H A E L J . B A R K E R & S O N I A H . M c D O W E L L How courts are interpreting compliance with HUD regulations for contact with the borrower and counseling.