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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 19, 2012 Decided January 4, 2013

No. 11-5288

ROBERT BENNETT, ET AL.,

APPELLANTS

v.

SHAUN DONOVAN, IN HIS CAPACITY AS SECRETARY OF THE

UNITED STATES DEPARTMENT OF HOUSING AND URBAN

DEVELOPMENT,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:11-cv-00498)

Jean Constantine-Davis argued the cause for appellants. 

With her on the briefs were Steven A. Skalet and Craig L.

Briskin. Janell M. Byrd entered an appearance.

Benjamin M. Shultz, Attorney, U.S. Department of Justice,

argued the cause for appellee. With him on the brief were Stuart

F. Delery, Acting Assistant Attorney General, Ronald C.

Machen Jr., U.S. Attorney, Michael S. Raab and Mary L. Smith,

Attorneys.

Before: BROWN, Circuit Judge, and EDWARDS and

SILBERMAN, Senior Circuit Judges.

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Opinion for the Court filed by Senior Circuit Judge

SILBERMAN.

SILBERMAN, Senior Circuit Judge: Two widowed spouses

of homeowners with reverse-mortgage contracts faced

foreclosure by mortgage lenders after their spouses died. They

brought suit against the Secretary of the Department of Housing

and Urban Development, alleging that HUD’s regulation

defining the conditions under which it would insure a reversemortgage agreement was inconsistent with the applicable statute. 

The district court dismissed for lack of standing, but we reverse. 

The district court correctly reasoned that if relief for appellants’

injuries depended on the independent actions of the lenders —

deciding whether to foreclose or not — then appellants would

lack standing. But after, perhaps, a more thorough presentation

before us, we think that, assuming the regulation is unlawful,

HUD itself has the capability to provide complete relief to the

lenders and mortgagors alike, which eliminates the uncertainty

of third-party action that would otherwise block standing. 

I.

A “reverse mortgage” is a form of equity release in which

a mortgage lender (typically, a bank) makes payments to a

borrower based on the borrower’s accumulated equity in his or

her home. Unlike a traditional mortgage, in which the borrower

receives a lump sum and steadily repays the balance over time,

the borrower in a reverse mortgage receives periodic payments

(or a lump sum) and need not repay the outstanding loan balance

until certain triggering events occur (like the death of the

borrower or the sale of the home). Because repayment can

usually be deferred until death, reverse mortgages function as a

means for elderly homeowners to receive funds based on their

home equity. 

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Reverse mortgages are generally non-recourse loans,

meaning that if a borrower fails to repay the loan when due, and

if the sale of the home is insufficient to cover the balance, then

the lender has no recourse to any of the borrower’s other assets. 

This feature is, of course, favorable to borrowers but introduces

significant risk for lenders — if regular disbursements are

chosen, they can continue until the death of the borrower (like

a life annuity), and the loan balance will increase over time,

making it less and less likely that the borrower will be able to

cover the full amount. If a borrower lives substantially longer

than expected, lenders could face a major loss. 

Congress, concerned that this risk was deterring lenders

from offering reverse mortgages, authorized HUD to administer

a mortgage-insurance program, which would provide assurance

to lenders that, if certain conditions were met, HUD would

provide compensation for any outstanding balance not repaid by

the borrower or covered by the sale of the home. The Housing

and Community Development Act of 1987 set out those

conditions. The particular provision at issue in this case states:

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.

12 U.S.C. § 1715z-20(j) (emphasis added). HUD promulgated

regulations to implement the Act, which include the following

provision establishing when insured loans become due and

payable:

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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 of his

or her title in the property and no other mortgagor

retains title to the property.

24 C.F.R. § 206.27(c)(1).

Robert Bennett and Leila Joseph are the surviving spouses

of reverse-mortgage borrowers whose mortgage contracts were

executed pursuant to HUD’s insurance program. Only their

spouses, not the appellants themselves, were legal borrowers

under the mortgage contract. Appellants allege that they were

assured by their brokers that they would be protected from

displacement after their spouses died, and that in reliance on this

protection, they quitclaimed interest in the homes they had

owned jointly with their spouses when their mortgages were

originated.1

Yet when appellants’ spouses died, the respective lenders

both asserted their right to immediate repayment of the loan. 

Their claim was based on language in the mortgage contracts

stating that the balance became due and payable if “[a] Borrower

dies and the Property is not the principal residence of at least

Both Bennett and Joseph were younger than their respective

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spouses, and because loan limits depend on the age of the youngest

borrower, quitclaiming interest in their homeslikely allowed the banks

to provide appellants more favorable loan terms than if they had been

parties to the contract as well. Pricing of reverse mortgagesis like the

inverse of life-insurance policies — older borrowers are expected to

live for a shorter period of time, and thus draw fewer payments over

the life of the mortgage, so the magnitude of those payments can be

greater for a given amount of equity.

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one surviving Borrower.” Neither Bennett nor Joseph were

“borrowers” under the mortgage contracts. When appellants

failed to repay the loans, the lenders initiated foreclosure

proceedings.

Bennett and Joseph responded by filing suit against the

Secretary of HUD in the District Court for the District of

Columbia. They asserted that HUD’s promulgation of 24 C.F.R.

§ 206.27(c) was unlawful because insuring loans payable on the

death of the last surviving borrower was inconsistent with 12

U.S.C. § 1715-z20(j), which protects “homeowners” from

displacement and defines “homeowner” to include “spouse of

the homeowner.” On appellants’ view, whether or not a spouse

is also a borrower is irrelevant.

The district court dismissed the complaint for lack of

standing. Bennett and Joseph could not show that a favorable

outcome — that is, a declaratory judgment that HUD’s

regulation violated the statute — would redress this harm. Even

if HUD should never have insured these mortgages, the lenders

now had a lawful right to foreclose under the mortgage contracts

themselves, and that right did not depend on the legality of

HUD’s regulation. The district court therefore concluded that

this set of facts did not fall under any of the limited

circumstances whereby redressability of a plaintiff’s injury can

be based on the actions of a regulated third party. 

II.

The issue on appeal is limited to appellants’ standing. But

we admit to being somewhat puzzled as to how HUD can justify

a regulation that seems contrary to the governing statute. HUD

explains that it is specially concerned about the scenario in

which a homeowner, after taking out a reverse mortgage,

marries a spouse — particularly a young spouse — and thereby

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significantly increases a lender’s risk. It would seem, however,

that HUD could legitimately deal with that problem by issuing

a regulation defining a “spouse” as only a spouse in existence at

the time of the mortgage. Be that as it may, we turn to the

standing question. 

To further limit our focus, it is only the redressability

component of Article III standing that is in dispute. See Lujan

v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (plaintiffs

must show that it is likely, and not merely speculative, that a

decision in their favor will redress their injury). There is no

dispute that the risk of displacement upon foreclosure constitutes

an injury in fact, and although the district court did not

specifically determine causation, we see little reason to doubt

that a causal connection exists between HUD’s actions and

appellants’ harm. Had HUD not issued its allegedly unlawful

regulation — which insures mortgages that protect from

displacement only surviving borrowers instead of surviving

spouses — it is reasonable to assume that the lenders would not

have executed contracts under these terms.

But redressability is a closer question because it is the

private lenders, not HUD itself, that currently threaten

foreclosure. Bennett and Joseph point out that the lenders are

heavily regulated by HUD and would decline to foreclose if

HUD so suggested — HUD is the “900-pound gorilla” — and

thus a declaratory judgment that HUD’s regulation is unlawful

would likely redress their injuries. HUD argues that the lenders

are independent decision-makers with respect to foreclosure,

that they will have a legal right to foreclose (and economic

incentive to do so) regardless of the outcome of this litigation,

and therefore that any redress would be merely speculative.

Our seminal case discussing standing in the context of a

regulated third party is National Wrestling Coaches Ass’n v.

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Department of Education, 366 F.3d 930, 938 (D.C. Cir. 2004)

(“When a plaintiff’s asserted injury arises from the

Government’s regulation of a third party that is not before the

court, it becomes ‘substantially more difficult’ to establish

standing.” (quoting Lujan, 504 U.S. at 562)). We held that

men’s wrestling organizations lacked standing to challenge

interpretations of Title IX regulations that caused schools to

eliminate or reduce the size of the their men’s wrestling teams. 

Id. at 933. That was because, assuming the interpretations were

unlawful, schools could still make their own decisions about

whether to forego elimination of a wrestling team or to reinstate

a disbanded program. Educational institutions were, in this

respect, “truly independent of government policy.” Id. at 941. 

Bennett and Joseph’s case appears close to the facts of National

Wrestling. Both cases involve third parties who took actions

because of allegedly unlawful agency decisions, but who would

have no compelling reason to reverse those actions were the

decisions held unlawful by a court. 

In that regard, the lenders have no pecuniary interest in

withholding foreclosure, even if appellants prevailed on the

merits. Cf. Abigail Alliance for Better Access to Developmental

Drugs v. Eschenbach, 469 F.3d 129, 135-36 (D.C. Cir. 2006)

(public interest group had standing to seek to enjoin the FDA

from enforcing a policy barring the sale of drugs to their

members because drug companies would have clear financial

incentives to sell their products). Bennett and Joseph claim that

the lenders would not want to lose their HUD insurance and that

foreclosing after a court finds the regulation unlawful would

somehow effect this result. But appellants overlook 12 U.S.C.

§ 1709(e), which states that an insurance contract executed with

HUD “shall be conclusive evidence of the eligibility of the loan

or mortgage for insurance, and the validity of any contract of

insurance so executed shall be incontestable in the hands of an

approved financial institution . . . , except for fraud or

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misrepresentation.” The lenders thus have a statutory guaranty

that their contracts will remain eligible for insurance, and no

ruling on the validity of HUD’s regulation will threaten this

protection.

Indeed, HUD’s own regulations actually require lenders to

“commence foreclosure of the mortgage within six months of

giving notice to the mortgagor that the mortgage is due and

payable,” 24 C.F.R. § 206.125(d)(1), or else HUD maywithhold

interest disbursements accordingly, id. § 206.129(d)(2)(iii). See

also id. § 206.125(d)(3) (lenders “must exercise reasonable

diligence in prosecuting the foreclosure proceedings to

completion”). So not only would prompt foreclosure fail to

forfeit the lenders’ insurance, but maintaining that insurance

actually requires it. To be sure, if the regulation was found

unlawful, HUD could decline to enforce these requirements,

which would give the lenders the option to withhold foreclosure

without forfeiting their insurance. But that course would still

leave the lender with an independent decision (and with no

economic incentive not to foreclose). 

 

Bennett and Joseph nevertheless insist that there is

“substantial evidence of a causal relationship,” Nat’l Wrestling,

366 F.3d at 941, between HUD and the lenders that participate

in its reverse-mortgage program. Appellants explain how HUD

has substantial control over most of the program’s features,

which in appellants’ view, amounts to the conclusion that the

lenders are not “truly independent of government policy.” Id.

But the phrase “truly independent,” as we used it in

National Wrestling, does not refer to the general relationship

between a third party and a government agency. The relevant

question is whether a third party is independent of government

policy with respect to the action at issue in a particular case.

Here, that action is foreclosure according to the terms of a

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lawfully executed mortgage contract, and in that respect, the

lenders are independent of HUD’s control. Insofar as the

lenders maintain the right to foreclose, Bennett and Joseph

would lack standing to bring suit against HUD.

* * * 

It does appear to us, however, that HUD has additional

statutorymeans to provide complete reliefto both appellants and

their lenders, and at least one such avenue of relief would

remove speculation as to independent third-party actions. That

statutory provision is 12 U.S.C. § 1715z-20(i). This subsection

is titled “Protection of homeowner and lender” and states in

relevant part:

(1) “[I]n order to further the purposes of the program

authorized in this section, the Secretary shall take any

action necessary —

(A) to provide any mortgagor under this section

with funds to which the mortgagor is entitled

under the insured mortgage or ancillary contracts

but that the mortgagor has not received because of

the default of the party responsible for payment;

(B) to obtain repayment of disbursements

provided under subparagraph (A) from anysource;

and

(C) to provide any mortgagee under this section

with funds . . . to which the mortgagee is entitled

under the terms of the insured mortgage or

ancillary contracts authorized in this section.

(2) Actions under paragraph (1) may include —

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(A) disbursing funds to the mortgagor or

mortgagee from the Mutual Mortgage Insurance

Fund; [and]

(B) accepting an assignment of the insured

mortgage notwithstanding that the mortgagor is

not in default under its terms, and calculating the

amount and making the payment of the insurance

claim on such assigned mortgage . . . .

(emphasis added). Neither party’s briefs explicitly discuss the

precise text of this provision. Bennett and Joseph describe the

statute as compelling HUD to “take any action necessary” to

“further the purposes of the [reverse mortgage] program” — a

reading that misleadinglycharacterizes HUD as having authority

to take any action to further any purpose of the program, as

opposed to authority to take certain actions to effect the

particular goals listed in paragraph (1). HUD, unfortunately,

ignores the provision almost entirely.

But notwithstanding appellants’ limited presentation of the

issue, they do suggest a means of relief that appears to fall

within this subsection and also resolves their standing problem

— HUD could accept assignment of the mortgage, pay off the

balance of the loans to the lenders, and then decline to foreclose

against Bennett and Joseph. Accepting assignment and

disbursing funds are both actions specifically authorized by

paragraph (2), and such actions could be used to satisfy the

“trigger” condition in subparagraph (1)(C) — to provide lenders

with funds to which they are entitled under their insured

mortgages. 

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It might seem odd for the borrowers to benefit from a

provision intended to protect the lenders, but there is no doubt 2

here that the lenders were entitled to further funds under their

mortgage contracts. And, of course, if HUD were to accept

assignment, it would be within its discretion as the holder of the

contract to simply decline to foreclose. That this remedy would

also benefit the borrowers is hardly a problem — and indeed,

doing justice to § 1715z-20(j)’s intended protection for spouses

would seem to “further the purposes of the program authorized

in this section.” Id. § 1715z-20(i)(1). 

In sum, this remedy eliminates the uncertainty of third-party

action, which likewise eliminates the redressability problem —

if HUD took this series of steps, then HUD, and not the lenders,

would be in the position of deciding whetherto foreclose against

Bennett and Joseph. To be sure, the statute does not make clear

whether “accepting an assignment of the insured mortgage”

requires the lender’s consent. Yet, even assuming the lenders’

agreement would be needed, it would clearly be in the lenders’

“pecuniary interest,” Abigail Alliance, 469 F.3d at 135, to

receive the full balance of the loan immediately, rather than face

the uncertainty and transaction costs of foreclosure. So even

though this potential remedy might involve third-party conduct,

there is no serious doubt as to how the lenders would respond.

We do not hold, of course, that HUD is required to take this

precise series of steps, nor do we suggest that the district court

should issue an injunction to that effect. Appellants brought a

complaint under the Administrative Procedure Act to set aside

an unlawful agency action, and in such circumstances, it is the

Subparagraphs (A) and (B) — which give HUD authority to 2

ensure that mortgagors receive funds due under their contracts — are

irrelevant, because Bennett and Joseph were not actually entitled to

any further funds under their contracts.

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prerogative of the agency to decide in the first instance how best

to provide relief. See N. Air. Cargo v. U.S. Postal Serv., 674

F.3d 852, 861 (D.C. Cir. 2012) (“When a district court reverses

agency action and determines that the agency acted unlawfully,

ordinarily the appropriate course is simply to identify a legal

error and then remand to the agency, because the role of the

district court in such situations is to act as an appellate

tribunal.”).3

Perhaps HUD would provide the precise relief we have

outlined, perhaps it would find another alternative, or perhaps it

would decide no such relief was appropriate. We recognize that,

even if the district court issues a declaratory judgment,

appellants still have no guaranty of relief. Though of course,

if Bennett and Joseph prevailed on the merits in the district court

but were dissatisfied with HUD’s remedy, they would always

have the option to seek review on the ground that HUD’s actions

were “arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law.” 5 U.S.C. § 706(2)(A). 

The relevant question for standing, however, is not whether

relief is certain, but only whether it is likely, as opposed to

merely speculative. Lujan, 504 U.S. at 561. There would

indeed be a problem of merely speculative relief were the

lenders the only party with discretion not to foreclose, but 

§ 1715z-20(i) gives HUD the tools to remove this uncertainty. 

HUD is the government actor alleged to have caused appellants’

injury, and HUD is the actor that can provide relief — that

arrangement is sufficient to establish that relief is likely.

Northern Air Cargo was not technically an APA case because

3

the Postal Service is exempt from APA review, 674 F.3d at 858, but

the same principle applies regardless.

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Because we decide that appellants have standing, we need

not consider their alternative argument that the district court

abused its discretion in denying them leave to amend their

complaint. The judgment of the district court is reversed, and

we remand for proceedings consistent with this opinion.

So ordered.

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