Bennett v. Shaun Donovan Sec'y, Civil Action No. 11–0498 (ESH).

Citation797 F.Supp.2d 69
Decision Date15 July 2011
Docket NumberCivil Action No. 11–0498 (ESH).
PartiesRobert BENNETT, et al., Plaintiffs, v. Shaun DONOVAN Secretary, Housing and Urban Development, Defendant.
CourtUnited States District Courts. United States District Court (Columbia)

OPINION TEXT STARTS HERE

Janell Maria Byrd, Craig L. Briskin, Steven A. Skalet, Mehri & Skalet, PLLC, Jean Marie Constantine–Davis, Aarp Foundation Litigation, Washington, DC, for Plaintiffs.

Jeffrey Michael Smith, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

ELLEN SEGAL HUVELLE, District Judge.

Plaintiffs have sued the Secretary of the Department of Housing and Urban Development (Secretary) in his official capacity, alleging that certain regulations that implement the Home Equity Conversion Mortgage (“HECM”) program violate the Administrative Procedures Act (“APA”), 5 U.S.C. § 551 et seq. Although plaintiffs originally brought four claims against the Secretary, the parties agree that three of the claims are now moot, so these counts have been withdrawn without prejudice. (Def.'s Combined Mem. in Support of his Mot. to Dismiss and in Opp. To Pls.' Mot. for Prelim. Inj. (“Def.'s Mot.”) at 14; Pls.' Mem. in Opp. to Def.'s Mot. (“Pls.' Opp'n”) at 3–4.) Plaintiffs' surviving claim alleges that the Secretary has acted contrary to law by failing to protect the spouses of holders of HECMs from foreclosure. (Compl. ¶¶ 148–57.) The Secretary now moves to dismiss, arguing that plaintiffs' claim should be dismissed under Fed.R.Civ.P. 12(b)(1) because plaintiffs lack standing. The Secretary moves, in the alternative, to dismiss plaintiffs' claim under Fed.R.Civ.P. 12(b)(6) because his interpretation of the statute is both in accordance with the unambiguously expressed intent of Congress and based on a permissible construction of the statute. For the following reasons, the Court grants the Secretary's motion to dismiss for lack of jurisdiction.

STATUTORY AND REGULATORY FRAMEWORK

An HECM, or a “reverse mortgage,” is a mortgage that provides “future payments to the homeowner” from a “housing creditor,” “based on accumulated equity” held by the homeowner. 12 U.S.C. § 1715z–20(b). The HECM program is designed to “authorize the Secretary to carry out a program of mortgage insurance to “meet the special needs of elderly homeowners,” 12 U.S.C. § 1715z–20(a) (emphasis added), and was authorized by Congress as part of the Housing and Community Development Act of 1987. Pub.L. No. 100–242, 101 Stat. 1815, 1908 (1988). Unlike a traditional mortgage, an HECM pays the proceeds of the loan to the mortgagor over an “extended period,” while the mortgagor repays the mortgagee in a single payment at the end of a set period of time or after certain qualifying events have occurred.1 53 Fed.Reg. 43,156 (Oct. 25, 1988). Payments are made to the mortgagor via a lump sum payment, monthly payments, or a line of credit. (Def.'s Mot. at 2; see also 12 U.S.C. § 1715z–20(d)(9).) A mortgage that is insured under this program must provide that the “homeowner” shall not be liable for the difference in “remaining indebtedness of the homeowner under the mortgage and the amount recovered by the mortgagee from (A) the net sales proceeds from the dwelling that are subject to the mortgage” or (B) the insurance benefits paid” to the mortgagee pursuant to the statute. Id. § 1715z–20(d)(7). Thus, a mortgagee may not recover the balance of a loan by suing a mortgagor, obtaining a deficiency judgment, and/or attaching her other assets. ( See Def.'s Mot. at 2.) As a result, the “collateral risk of a home equity conversion mortgage” is “greatest in the out years because the loan balance continues to grow as long as the mortgagor occupies the property,” and the possibility of loss “becomes quite high” if the “mortgagor occup[ies] the property for many years beyond his or her normal life expectancy at loan origination.” 53 Fed.Reg. 43,161 (Oct. 25, 1988). To mitigate against this risk, and to “encourage and increase the involvement of mortgagees and participants in the mortgage markets,” the HECM statute permits the Secretary to insure HECMs that meet the eligibility requirements. See 12 U.S.C. §§ 1715z–20(a), (d), (j).

The statute uses various terms to refer to borrowers and lenders, including “homeowner,” “elderly homeowner,” “mortgagor,” and “mortgagee.” The terms ‘elderly homeowner’ and ‘homeowner’ mean any homeowner who is, or whose spouse is, at least 62 years of age or such higher age as the Secretary may prescribe.” 2 Id. § 1715z–20(b)(1). The HECM statute adopts the definitions of “mortgagee” and “mortgagor” contained in 12 U.S.C. § 1707. Id. § 1715z–20(b)(2). Thus, the term “mortgagee” includes “the original lender under a mortgage, and his successors and assigns approved by the Secretary,” and “mortgagor” includes the “original borrower under a mortgage and his successors and assigns.” Id. § 1707(b). A mortgagor must “qualif [y] as an elderly homeowner” and must receive “adequate counseling ... by an independent third party to be eligible for an HECM. Id. § 1715z–20(d)(2).

The statute also prevents the Secretary from insuring mortgages that do not protect homeowners for as long as they live in and own their home:

The Secretary may not insure a home equity conversion mortgage under this section unless such mortgage provides that the homeowner's obligation to satisfy the loan obligation is deferred until the homeowner's death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary. For purposes of this subsection, the term “homeowner” includes the spouse of a homeowner.

Id. § 1715z–20(j) (“subsection (j)). The Secretary has implemented this statutory command with the following regulation:

(1) The mortgage shall state that the mortgage balance will be due and payable in full if a mortgagor dies and the property is not the principal residence of at least one surviving mortgagor, or a mortgagor conveys all or his or her title in the property and no other mortgagor retains title to the property.

24 C.F.R. § 206.27(c) (emphasis added). Once the loan becomes due, the mortgagee “shall require” the mortgagor to “pay the mortgage balance, including” interest, “sell the property for at least 95% of the appraised value ... with the net proceeds of the sale to be applied towards the mortgage balance,” or provide the mortgagee with the deed to the property. 24 C.F.R. § 206.125(a)(2). The mortgagor has thirty days after receiving notice from the mortgagee to pay the balance before the mortgagee may begin foreclosure proceedings. Id.

FACTUAL AND PROCEDURAL HISTORY

Each of the three plaintiffs is a widowed spouse of an HECM mortgagor. (Compl. ¶¶ 59–64, 84–94, 107–116.) Plaintiffs, however, were neither listed on the deeds to their homes nor on the HECMs that their spouses had signed. ( Id. ¶¶ 61, 92, 114.) The Secretary points out (Def.'s Mot. at 10), and plaintiffs do not contest ( see Pls.' Opp'n at 9), that the mortgages on plaintiffs' homes contain the following language, taken from the HECM form contract: “9. Grounds for Acceleration of Debt. (a) Due and Payable. Lender may require immediate payment in full of all sums secured by this Security Instrument if: (i) A Borrower dies and the Property is not the principal residence of at least one surviving borrower.” ( See Compl. Ex. 6.)

Thus, per the contract language in the HECMs that had been signed by plaintiffs' spouses, and per 24 C.F.R. § 206.27, the HECMs on plaintiffs' homes became due upon their spouses' deaths, because the only borrower/mortgagor listed on each instrument was deceased. ( Id. ¶¶ 66, 97, 118.) Plaintiffs allege that, as a result, they are now the subject of foreclosure actions brought by HECM mortgagees. ( See id. ¶¶ 74, 102, 121.) Plaintiffs allege that HUD regulations improperly implement the anti-displacement section in subsection (j) of the HECM statute. ( Id. ¶ 156.) Specifically, they argue that 24 C.F.R. § 206.27(c) illegally allows the Secretary to insure mortgages that limit protection to “surviving mortgagors,” even though subsection (j) prevents the Secretary from insuring mortgages that do not protect “the spouse of a homeowner.” ( Id. ¶¶ 148–157.) Thus, they argue, had the Secretary properly implemented subsection (j), the reverse mortgages on their homes would not be payable and they would not be facing foreclosure. ( Id. ¶ 156.)

Plaintiffs originally sought both declaratory and injunctive relief in their complaint, which was filed on March 8, 2011. ( Id. at 1.) On March 31, 2011, plaintiffs filed a request for a preliminary injunction. (Mot. For Prelim. Inj. (Dkt. No. 2).) The Secretary then filed a memorandum opposing the preliminary injunction and moving to dismiss, arguing that plaintiffs' first three causes of action were moot and that HUD had taken steps to halt the threatened bank foreclosures. (Def.'s Mot. at 11, 14.) Plaintiffs withdrew their motion for preliminary injunctive relief on April 12 (Dkt. No. 11), and subsequently agreed that their first three causes of action were moot. (Pls.' Opp'n at 3–4.) However, they continue to allege that HUD violated subsection (j) of the HECM statute, and they seek both a declaratory judgment that “HUD failed to properly implement the anti-displacement protections in the HECM statute, has illegally passed regulations that contravene this protection, and that [they] are entitled to the protections” of subsection (j), and a “permanent injunction[ ] prohibiting HUD from failing to accord [them] protection from displacement guaranteed to them by the HECM statute.” (Compl. at 28–29.)

ANALYSIS

I. STANDING

To establish that this Court has jurisdiction to hear plaintiffs' claims, plaintiffs must show that they have standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (“the core component of standing is an essential and unchanging part of the case-or-controversy requirement of Article III). In order to...

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  • Bennett v. Castro
    • United States
    • U.S. District Court — District of Columbia
    • 24 Noviembre 2014
    ...Procedure Act, 5 U.S.C. § 551, et seq . This Court initially dismissed the case for lack of standing in Bennett v. Donovan (“Bennett I ”), 797 F.Supp.2d 69 (D.D.C.2011). The Court of Appeals reversed. See Bennett v. Donovan, 703 F.3d 582 (D.C.Cir.2013).This Court, on remand, granted summary......
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    • United States
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    • 5 Febrero 2019
    ...spouses. The first legal challenge took place in the U.S. District Court for the District of Columbia. See Bennett v. Donovan , 797 F.Supp.2d 69 (D.D.C. 2011) (" Bennett I "), rev'd 703 F.3d 582 (D.C. Cir. 2013). In Bennett I , surviving spouses brought suit against HUD under the APA, claim......
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    • United States
    • U.S. District Court — District of Columbia
    • 28 Agosto 2014
    ...Act (“APA”), 5 U.S.C. §§ 551, et seq . This Court initially dismissed the case for lack of standing. See Bennett v. Donovan (“Bennett I ”), 797 F.Supp.2d 69, 77–78 (D.D.C.2011). The Court of Appeals reversed. See Bennett v. Donovan, 703 F.3d 582, 590 (D.C.Cir.2013).On remand, this Court gra......
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