Court Rules Against HUD in Reverse Mortgage Non-Borrowing Spouse Suit

A court of appeals this week ruled in favor of two plaintiffs in a lawsuit filed more than two years ago by the surviving spouse of a reverse mortgage borrower.

The ruling places the Department of Housing and Urban Development as responsible for providing a remedy for the plaintiffs, who first sued the agency in March 2011 over the right to remain in their homes, protected as homeowners. 

Represented by the AARP Litigation Foundation, plaintiffs Robert Bennet of Annapolis, Maryland and Leila Joseph of Brooklyn, NY who claimed the Department of Housing and Urban Development violated federal law in foreclosing on the homes they had shared their late spouses—reverse mortgage borrowers—for which they were not on the home titles.


The court had previously dismissed the case for lack of standing, but it was brought back by AARP in early 2013 in the court of appeals. 

The judge ruled Monday on the case, in which the plaintiffs sought a declaratory judgment that HUD’s regulation violates the federal law as well as demanded that HUD be required to “take steps immediately to provide Plaintiffs the protection” of the rule as interpreted. 

Under the ruling, HUD must grant “relief” through a remedy to the issue, though that remedy has not been determined. 

In its judgement, the court stated it is now HUD’s prerogative to decide how best to provide relief. 

AARP noted the implications for an unknown number of non-borrowing spouses, in response to the ruling. 

“The decision marks a turning point for surviving spouses such as our clients and ensures that they will receive the protections guaranteed by the law: that they will be able to remain in their homes, despite the loss of their husband or wife,” said Jean Constantine-Davis, senior attorney with AARP Foundation Litigation.

AARP said the decision will ultimately affect an “untold but substantial number” of similar surviving spouses.

HUD had not returned a request for comment as of press time. 

Written by Elizabeth Ecker

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  • Wow. Wonder where this is all gonna go, I’m sure attorneys will be contacting every past and present reverse mortgage borrower to dig up cases. I don’t know the details of the case or evidence, but on the surface I’m surprised by the court’s decision.

  • The court says HUD should find a solution. The appellate court’s ruling in January and my article in National Mortgage News (“Solve the Non-borrowing Spouse Problem” January 15, 2013) provide options for resolution.

    • Atare,

      However, HUD can appeal this decision. It chose not to appeal the earlier ruling which allowed for the current decision but that is not an endorsement of the current decision the court made.

      Good to see your name again on this website.

      • Jim,
        As you may guess, I am a student of this issue and the resulting litigation. I doubt that HUD would appeal for these reasons:1) The DC Circuit did not buy HUD’s arguments in January when it granted the plaintiffs standing;2) The court made it clear that HUD can and should solve the problem, and it even offered some ideas for resolution;3) Any appeal will have to begin at DC Circuit;4)The District Court’s decision on September 30 essentially said the same thing: HUD should solve the problem.

        As always I enjoy your comments. Greetings to Marilu.

      • Atare,

        Some view the judge in this decision as “above the law.” However, like you, I do not view this decision as such. What has yet to be litigated is the non-borrowing spouse who was not a spouse at closing. The law only addresses spouses who are spouses at the time of what is normally considered termination; it does not address spouses who were spouses at closing.

        When it comes to litigation, the ultimate reactions of litigants are not easy to predict. Perhaps your assessment is the likely outcome but HUD has not indicated it will give up its right to appeal. Perhaps we will have that decision within days after the government is reopened. Since all that the court of appeals provided was standing in its earlier ruling, there is no clear indication how it would decide on the lower court decision. There is also no indication how the Supreme Court would rule on the decision if either party decides to appeal a possible decision by the court of appeals. There would be no compelling need for the Supreme Court to hear the decision of the appeals court since there would not be any dispute among the courts of appeal.

        Since the Secretary now has the authority to “establish, by notice or mortgagee letter, any additional or alternative requirements that the Secretary, in the Secretary’s discretion, determines are necessary to improve the fiscal safety and soundness of the program authorized by this section, which requirements shall take effect upon issuance” under 12 USC 1715z-20(h)(3), it would seem the Secretary could simply authorize that 12 USC 1715z-20(j) shall not apply to any new endorsements. It does not seem the Secretary could make a retroactive application under this provision. Then there is always the course of action of having Congress address the issue in corrective legislation.

        With the new authority given to the Secretary, this should be an interesting next few months, if not years.

        Greet your wife and children for both of us as well.

        (The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)

      • Atare,

        It seems HUD once again has gone against conventional wisdom. It will be interesting to read the grounds for its appeal. No matter how that case comes out, it seems the next stop for this case is the Supremes (that is the SC Justices) welcoming HUD with the lyrics of “My World Is Empty without You, Babe” but with a few key lyrical changes.

        We probably will not have any resolution about this case until at least late 2014, if not late 2016. Finally a HECM case looking like it will make it to the Supremes.

      • Jim —
        I was wrong about HUD’s response to the District Court’s decision in September. Like you I cannot wait to read their appellate brief. I believe the appeal is ill-advised. It drags on an issue that is overdue for resolution. Even if HUD prevails on appeal, it will be a pyrrhic victory.

      • Atare,

        You are absolutely right. This is an issue which should have never come into play.

        HUD had the right to get the provision corrected to read exactly the way they believed it should but somehow they did not take that remedy.

  • Matt,

    The HECM law has a specific provision which states: ”

    (j) Safeguard to prevent displacement of homeowner

    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. Section 1647(b) of title 15 and any implementing regulations issued by the Board of Governors of the Federal Reserve System shall not apply to a mortgage insured under this section.”

    It is 12 USC 1715-z(j). It is part of the original law. It was specifically this HECM provision which was being litigated. Nothing indicates there are similar provisions on other FHA programs since neither legal counsel for the plaintiffs nor HUD reference such provision(s). It seems the provision is unique to HECMs.

    • Mr. Denton,

      There most certainly is the non-borrowing spouse concept on forward mortgages but there is no similar displacement provision on forward mortgages.

      Is that what you meant to say?

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