AARP Reverse Mortgage Lawsuit Against HUD Dismissed

The lawsuit filed by AARP against the Department of Housing and Urban Development concerning three reverse mortgage borrowers facing foreclosure has been dismissed by the Court, without prejudice, according to court documents. The decision came on July 15, in an important, but not necessarily permanent, victory for HUD.

The lawsuit, filed on March 8 of this year, brought two issues to the attention of the Court. The first had to do with HUD’s non-recourse policy regarding HECM loans, and the second, bringing to light the interpretation of the word “homeowner” that appears in the HECM statute. Whether the term “homeowner” includes a non-borrowing spouse of a HECM borrower remained an outstanding issue after HUD rescinded its non-recourse guidance in April.

“We are disappointed with the Court’s ruling and are evaluating our options on how to proceed from here,” Jean Constantine-Davis, AARP Foundation Senior Attorney, told RMD in an email.

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While the Court dismissed the remaining issue in the lawsuit for lack of jurisdiction, still there are some unanswered questions. The Court did not rule as to whether HUD’s interpretation of the HECM statute was permissible or correct. For this reason, noted analysis from Weiner Brodsky Sidman Kider PC, legal counsel for the National Reverse Mortgage Lenders association, the victory for HUD may be temporary, as HUD’s interpretation of the statute has yet to be addressed by the courts.

“It is not enough that the plaintiffs have been harmed or injured by the conduct they complain about; they must also show, among other things, that the court, if it ruled in their favor, could do something meaningful about it,” noted NRMLA’s counsel.

The Court did not contest the plaintiffs’ injuries, however, it found the plaintiffs have failed to establish redressability—that anything can be done by HUD to change the situation. Because the plaintiffs entered into contracts with private sector lenders, the documents state, their injuries can not be redressed by HUD. “Plaintiffs lack standing because the relief they seek would not redress their injuries,” court documents stated.

“The Court held that it was the Lenders, not HUD, that were pursuing the foreclosure actions against the plaintiffs,” according to the legal analysis from Weiner Brodsky Sidman Kider, “and that in doing so the Lenders were simply and correctly relying upon the contractual rights they had to foreclose under the mortgage instruments signed by the borrowers themselves.”

The dismissal, without prejudice, means that the plaintiffs can try their their case again or submit an amended complaint against HUD, said WBSK.

Further, the counsel noted, this victory may be temporary, “as HUD’s interpretation of the statute has yet to be addressed by the courts.”

Written by Elizabeth Ecker