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HECM Protects Non-Borrowing Spouses (Part VI): The Bennett 1.0 Appeal

Atare E. Agbamu
Sep 22, 2014

HUD’s contain-and-dismiss counterattack plan in the first non-borrowing spouses’ (NBS) lawsuit (we’ll call it Bennett 1.0) worked like a charm, for a while. The D.C. Federal District Court bought HUD’s argument that plaintiffs lacked “standing” to sue HUD. In its ruling against a widower and two widows, the court agreed that the plaintiffs had been hurt (they were in the jaws of foreclosures and displacements from their marital homes in state courts); however, it said their problems or injuries (foreclosures and displacements) were caused not by HUD but by the terms of mortgage contracts their dead spouses signed with third-party lenders.

Even when the plaintiffs asked the court to reconsider their case, pointing out that HUD is a party to every HECM loan and that it is the 900-pound gorilla in the HECM business, the court said, “no.”

The court’s decision was a low moment for the plaintiffs. It could have ended the NBS litigation saga. One of the three plaintiffs dropped out to take the hurriedly restored original HECM non-recourse option (see Part IV); a second one looked into that option. As we saw in part four, original non-recourse allowed heirs and estates of dead HECM borrowers to buy the mortgaged property for 95 percent of appraised market value. The no-standing ruling seemed like the end of the road for the non-borrowing spouses’ lawsuit but for the skill and doggedness of the litigators behind the remaining plaintiffs.

AARP Foundation Litigation and the D.C. law firm of Mehri & Skalet lawyers (who argued the plaintiffs’ case) proved a match for HUD’s army of Justice Department lawyers. Believing in the strength of their case, they moved the fight up the next level in the federal judicial food chain: the U.S. Court of Appeals for the District of Columbia Circuit, informally called the D.C. Circuit.

Established by Congress in 1893, the D.C. Circuit is generally considered the second most important federal court after the U.S. Supreme Court. It is often a prep court for the big court itself. Chief Justice John Roberts and Associate Justices Clarence Thomas, Antonin Scalia, and Ruth Bader Ginsburg are former members of the D.C. Circuit.

According to Wikipedia, the D.C. Circuit is “… given the responsibility of directly reviewing the decisions and rulemaking of many federal independent agencies of the United States government based in the national capital, often without prior hearing by a district court.” It also hears appeals involving the Administrative Procedure Act, a section of which plaintiffs claimed HUD violated.

The litigation strategists at HUD and the Justice Department who craftedcontain and dismiss probably never calculated that HUD’s disputed HECM rulemaking would be exposed to the judges of the D.C. Circuit. They figured their brilliant plan would so undercut plaintiffs’ case that it would die at the federal district court level, and it almost did. As events would turn out, it was a wrong calculation.

The D.C. Circuit Court decision in Bennett 1.0 is the subject of our next post.

Atare Agbamu is author of Think Reverse! With more than 200 articles on reverse mortgages in circulation since 2002, Agbamu wrote Forward on Reverse, the first regular monthly column on reverse mortgages in America’s financial media from 2002 to 2011. Through his advisory, ThinkReverse LLC, Agbamu advises financial professionals, institutions, and regulators across the country.


Sep 22, 2014