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Isaacson v. Secretary of Housing and Urban Development

United States District Court, W.D. Washington, Seattle

April 14, 2017

KAREN MARIE ISAACSON, Plaintiff,
v.
SECRETARY OF HOUSING AND URBAN DEVELOPMENT, Defendant.

          ORDER GRANTING MOTION TO DISMISS

          JAMES L. ROBART, United States District Judge

         I. INTRODUCTION

         Before the court is Defendant Secretary of Housing and Urban Development's (“the Secretary”) motion to dismiss for lack of subject matter jurisdiction and failure to state a claim. (Mot. (Dkt. # 23).) Plaintiff Karen Marie Isaacson, who is proceeding pro se and in forma pauperis, opposes the Secretary's motion. (Resp. (Dkt. # 24).) The court has considered the parties' briefing, the relevant portions of the record, and the applicable // law. Considering itself fully advised, [1] the court DISMISSES this case without prejudice for lack of subject matter jurisdiction.

         II. BACKGROUND

         Ms. Isaacson challenges as unconstitutional two mortgage insurance-related provisions promulgated by the Department of Housing and Urban Development (“HUD”): (1) the regulation codified at 24 C.F.R. § 203.43f(d)(iii) (“the Regulation”), and (2) the rule memorialized in HUD Handbook 4235.1 REV-1 § 3-4(B)(4) (“the Rule”). (See generally Compl. (Dkt. # 4).) The Rule and the Regulation govern which manufactured homes are eligible for mortgage insurance on home equity conversion mortgages (“HECM”), more commonly known as reverse mortgages. See HUD Handbook 4235.1 REV-1 § 1-3(A), available at https://portal.hud.gov/hudportal/ HUD?src=/programoffices/administration/hudclips/handbooks/hsgh/4235.1 (last visited Apr. 13, 2017). Ms. Isaacson contends that the Rule and the Regulation violate the Fifth Amendment by making her manufactured home ineligible for a reverse mortgage. (Compl. ¶¶ 4.01-.12.)

         A. Statutory, Regulatory, and Rulemaking Framework

         Section 255 of the National Housing Act (“NHA”) authorizes the Secretary to “carry out a program of mortgage insurance” that facilitates the reverse mortgage market. 12 U.S.C. § 1715z-20(a). The reverse mortgage market “permit[s] the conversion of a portion of accumulated home equity into liquid assets” for “elderly homeowners.” Id. § 1715z-20(a)(1); see also id.§ 1715z-20(b)(1) (defining “elderly homeowner”). Although the NHA contains multiple insurance eligibility restrictions, see Id. § 1715z-20(d)(1)-(2)(C), it also expressly leaves the prescription of additional eligibility requirements to the Secretary's discretion, id. § 1715z-20(d)(2)(D).

         Pursuant to this statutory authority, the Secretary has implemented a series of insurance eligibility rules and regulations, including the Rule and the Regulation at issue here. The Regulation is a subsection of 24 C.F.R. § 203.43f, which regulates what types of manufactured homes are eligible for mortgage insurance. See 24 C.F.R. § 203.43f. To be eligible for mortgage insurance, the Regulation requires that a manufactured home “have been occupied only at the location subject to the mortgage sought to be insured.” 24 C.F.R. § 203.43f(d)(iii). The Regulation has been in place since 1983. See Eligibility of Manufactured Homes for Mortgage Insurance, 48 Fed. Reg. 7731-01 (Feb. 24, 1983).

         HUD Handbook 4235.1 REV-1 (“the Handbook”) extends the availability of federal mortgage insurance to reverse mortgages on manufactured homes. See generally HUD Handbook 4235.1 REV-1. Section 3-4 of the Handbook limits the types of manufactured home that are eligible for reverse-mortgage insurance. Id. § 3-4. Many of the constraints the Handbook imposes are similar to the mortgage insurance eligibility requirements found in 24 C.F.R. § 203.43f. Id. The Rule, which is a subsection of Section 3-4, renders ineligible for mortgage insurance any reverse mortgage on a manufactured unit that was “installed or occupied previously at any other site or location.” Id. § 3-4(B)(4). The Rule has been in place since 1994. See Id. at “Transmittal” (indicating the Rule issued on November 18, 1994).

         B. Ms. Isaacson's Allegations

         In May 2016, Ms. Isaacson visited Guild Mortgage to “begin the process of applying” for a reverse mortgage. (Compl. ¶ 3.01.) When Ms. Isaacson mentioned that she had previously relocated her manufactured home, Guild Mortgage's loan officer informed Ms. Isaacson that the Rule precludes reverse mortgages on relocated manufactured homes. (Id. ¶ 3.02.) The loan officer emailed Ms. Isaacson an archived version of the Handbook, and Ms. Isaacson independently confirmed that the current version of the Handbook precludes a reverse mortgage on a relocated manufactured home.[2] (Id. ¶ 3.03.)

         Ms. Isaacson then contacted several departments of HUD to seek clarification or waiver of the Rule. (Id. ¶ 3.04, Ex. 1.) Eventually, a HUD employee responded that to be eligible for mortgage insurance, “the manufactured unit must not have been previously installed or occupied at any other site or location.” (Id. ¶ 3.04, Ex. 4 at 1.) He also confirmed that there is no exception to the Rule. (Id.) In response to Ms. Isaacson's request that HUD provide authority for the Rule, the HUD employee attached a copy of the Handbook. (Id. ¶ 3.04.)

         Ms. Isaacson asserts that the Secretary has prohibited movement of manufactured homes (id. ¶¶ 3.12-.14), exceeded his legislative authority (id. ¶¶ 3.16-.20), placed the Regulation and the Rule in difficult-to-locate sources (id. ¶ 3.21), forced third parties to convey bad news (id. ¶ 3.22), and misled various parties into believing the Regulation and the Rule are validly promulgated (id. ¶¶ 3.23-.29). She contends that the Secretary has thereby violated the Fifth Amendment's due process clause, including its equal protection component, and the Fifth Amendment's takings clause. (Id. ¶¶ 4.01-.12.)

         C. The Secretary's ...


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