Johnson v. US DEPT. OF HOUSING AND URBAN DEV., 88-2293 C (5).
| Decision Date | 21 August 1990 |
| Docket Number | No. 88-2293 C (5).,88-2293 C (5). |
| Citation | 742 F. Supp. 1055 |
| Parties | Karen JOHNSON, et al., Plaintiffs, v. The UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
Ann B. Lever, Kayla Vaughan, Susan Alverson, Roger J. Bertling, Legal Services of Eastern Missouri, Inc., St. Louis, Mo., for plaintiffs.
William Travis, St. Louis, Mo., for S. Comm. Bank.
Joseph B. Moore, Asst. U.S. Atty., St. Louis, Mo., for HUD and Samuel Pierce.
Donald F. Flint, Chief Counsel, Dept. of HUD, St. Louis, Mo., for HUD.
Thomas M. Newmark, Thomas P. Hohenstein, Gallop, Johnson and Newman, St. Louis, Mo., for Hillvale Associates, Medve-Wald Partnership and Rodan Management, Inc.
Margaret Plank, Federal Programs Branch, Dept. of Justice, Washington D.C., for Federal defendants.
This cause of action arose out of an agreement in April 1988 between defendants Hillvale Associates and Southern Commercial Bank, Mortgagor and Mortgagee, respectively, of the Hillvale Apartments project in the City of St. Louis (the private defendants), to terminate federal mortgage insurance for the project. Plaintiffs assert that the private defendants' agreement to terminate federal insurance and the United States Department of Housing and Urban Development's (HUD) acceptance of the termination of insurance, and its resultant termination of regulatory control over the Hillvale Apartments, violated the mortgage insurance contract, the National Housing Act (NHA), the Emergency Low Income Housing Preservation Act of 1987 (the Preservation Act), and the regulations promulgated thereunder.
In 1987, in response to a national housing crisis, Congress passed the Preservation Act as an interim emergency measure, effective until February 5, 1990, to permit Congress time to study the housing crisis and develop a more comprehensive permanent solution. The Preservation Act temporarily amended until 1990 various provisions in the National Housing Act. Specifically, the Act required § 221(d)(3) owners desiring to prepay their mortgages to develop a plan of action for terminating low income affordability restrictions. The plan of action had to be approved by HUD, and it could only be approved upon HUD's determination that low income tenants would not be unduly burdened.
Plaintiffs contended that by voluntarily terminating their mortgage insurance, defendants violated the Preservation Act. Plaintiffs argued that the Preservation Act affected both the mortgagor's ability to unilaterally prepay his mortgage, and the ability of the mortgagor and mortgagee to voluntarily terminate federal insurance. Defendants contended however that the Preservation Act applied only to the prepayment of mortgages. Congress was concerned with the mortgagor's ability to unilaterally divest himself of HUD restrictions. In the case of voluntary termination, however, both the mortgagor and the mortgagee have to agree to terminate the insurance. Defendants argued that there were very few instances of this occurring nationwide, and Congress did not foresee voluntary termination as a contributor to the national housing crisis.
The issue before this Court was whether the Preservation Act affected only the prepayment of mortgages, or whether it also included within its reach mortgagors and mortgagees who voluntarily agree to terminate federal insurance on their mortgages. As far as this Court could tell, this issue was one of first impression in this country.
This Court concluded that the procedures delineated in the Preservation Act did not apply to the voluntary termination of federal mortgage insurance. The Court reached this conclusion based upon three considerations. First, it was clear from the plain language of the statute that the procedures applied only to the prepayment of mortgages. Second, the Congressional hearings were replete with discussions of the problem of prepayment of mortgages, yet never made mention at any time of the effect the voluntary termination of mortgage insurance had in the overall scheme of the national housing crisis. Finally, HUD had determined that the procedures implemented by the Preservation Act did not apply to the voluntary termination of mortgage insurance.
After this Court entered its order on October 31, 1989, plaintiffs moved for injunction pending appeal. This Court granted that motion on November 29, 1989. The injunction was ordered to remain in effect until the expiration of the Emergency Low Income Housing Preservation Act which was to expire on February 5, 1990. On February 5, 1990 this Court extended the injunction pending appeal to September 30, 1990.
On December 15, 1989, the President of the United States, apparently in partial response to this Court's October 31, 1989 order, signed into law the Department of Housing and Urban Development Reform Act (Reform Act) which amends the Preservation Act to apply expressly to voluntary terminations of federal mortgage insurance.
In light of the enactment of the Reform Act, plaintiffs have moved for relief from judgment. Plaintiff's contend that the amendments and their legislative history clarify that the Preservation Act, as originally enacted in 1987, was intended to be applicable to voluntary mortgage insurance terminations. Because of these clarifications in legislative intent, plaintiffs request this Court to vacate its October 1989 order...
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