In United States v. Whitney, 602 F. Supp. 722 (W.D.N.Y. 1985), the United States sought to collect from a veteran a deficiency that arose from a mortgage foreclosure on property originally purchased by the veteran, but no longer owned by the veteran at the time of the lender's foreclosure.
The VA guaranteed the mortgage but, by agreement with the VA, the veteran remained personally liable on the mortgage debt, despite a subsequent transfer of the property and the assumption of the mortgage by others.
Years after the veteran sold the property, the lender foreclosed, without notice to Whitney, and the sale was insufficient to satisfy the debt due under the mortgage. As a result, the VA reimbursed the lender for the deficiency and then sought to collect from Whitney.
He claimed that "since he was never made a party to the original foreclosure proceeding . . . he was denied due process of law." Whitney, 602 F. Supp. at 725. The federal court agreed. Id. at 733.
With regard to the due process issue, the court recognized that "the failure to place Whitney on notice of the mortgage foreclosure raises concerns of constitutional magnitude." Id. at 731.
The court stated that: "it is clear that a mortgagor 'possesses a substantial property interest that is significantly affected by a foreclosure sale.'" Id. at 732.
Because a mortgagor has a legally protected property interest, he is "constitutionally entitled to notice reasonably calculated to apprise him" of the pending foreclosure. Id.
The court reasoned that, "in the absence of meaningful notice, the veteran is denied the opportunity to exercise his equity of redemption or to bid in on the proceeding disposing of the property." Id.
Moreover, the court was of the view that the name and address of the veteran "could have been easily ascertained prior to the foreclosure sale." Id.