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Isaacson v. Secretary of Housing And Urban Development

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

June 22, 2018



          Robert S. Lasnik United States District Judge.

         This matter comes before the Court on defendant's “Motion to Dismiss” pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Dkt. # 18. Plaintiff Karen Marie Isaacson alleges that the U.S. Secretary of Housing and Urban Development (the “Secretary”) violated her constitutional rights to due process, equal protection under the law, and freedom of contract. See Dkt. # 5. Defendant moves to dismiss on the basis that plaintiff both lacks standing and fails to state a claim upon which relief can be granted. The Court has considered the memoranda and evidence submitted by the parties, and the remainder of the record.[1] For the following reasons, defendant's motion is GRANTED.

         I. BACKGROUND

         In May 2016, plaintiff contacted a loan officer at Guild Mortgage seeking advice about obtaining a home equity conversion mortgage (also known as a “reverse mortgage”) for her manufactured home. Dkt. # 5 ¶ 3.04. After plaintiff mentioned that she had recently purchased the previously owned home and relocated it to her property, the loan officer allegedly told plaintiff that “HUD has a rule that if you move your house you can't get a reverse mortgage.” ¶ 3.05. The HUD rule to which the loan officer was referring appears in the HUD Handbook, HUD Handbook 4235.1 REV-1 § 3-4, (the “Rule”) as well as in the Code of Federal Regulations, 24 C.F.R. § 203.43f, (the “Regulation”). Both the Rule and the Regulation prevent HUD from insuring a reverse mortgage for a manufactured home if the home has been moved from the location where it was originally installed. Id. Plaintiff later received, via email from the loan officer, a copy of the HUD Handbook page on which the Rule was printed. Dkt. # 5 ¶ 3.07.

         Section 225 of the National Housing Act (“NHA”), authorizes HUD to extend optional insurance to lenders of qualifying reverse mortgages “to meet the special needs of elderly home owners” and “increase the involvement of mortgagees and participants in the mortgage markets.” 12 U.S.C. § 1715z-20(a). As a result, HUD does not contract directly with home owners but rather with authorized lenders to provide insurance on loans to members of the public. Id. § 1715z-20(c).

         The NHA further states that:

The Secretary may, upon application by a mortgagee, insure any home equity conversion mortgage eligible for insurance under this section and, upon such terms and conditions as the Secretary may prescribe, make commitments for the insurance of such mortgages prior to the date of their execution or disbursement to the extent that the Secretary determines such mortgages (1) have promise for improving the financial situation or otherwise meeting the special needs of elderly homeowners; (2) will include appropriate safeguards for mortgagors to offset the special risks of such mortgages; and (3) have a potential for acceptance in the mortgage market.

Id. § 1715z-20(c) (emphasis added). Accordingly, the Secretary may impose conditions upon HUD insurance. He is also bound to issue reverse mortgage insurance only to the extent that he determines such a mortgage will both include protections that insulate homeowners from certain risks and potentially be accepted by a lender in the mortgage market. See id.

         After receiving a copy of the Rule, plaintiff contacted HUD inquiring whether an exception might be made in her case. Dkt. # 5 ¶ 3.09. When HUD notified her that no such exception would be made, “[p]laintiff realized she would have no alternative but to sue HUD.” Id. ¶¶ 3.11-3.12. At no time did plaintiff submit an application to HUD for insurance or to Guild Mortgage (or any other lender) for a reverse mortgage.

         Plaintiff filed this lawsuit in September 2017. Dkt. ## 1, 5. The Secretary then filed a motion to dismiss, which asserts plaintiff lacks standing and fails to state a claim. Dkt. # 18.


         The Federal Rules of Civil Procedure state that, “[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3). In order for a federal court to have subject-matter jurisdiction over a claim, the plaintiff must have standing under Article III of the Constitution to challenge an alleged wrong in federal court. Warth v. Seldin, 422 U.S. 490, 498 (1975).

         A. Standing

         To establish standing, a plaintiff must show that (1) she suffered an injury in fact; (2) that a causal connection exists between the injury and the defendant's conduct; and (3) that it is likely that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). At the pleading stage, “[t]he party invoking federal jurisdiction bears the burden of establishing these elements.” Id. at 561. Though the Court treats pleading-stage factual allegations as true, plaintiff must allege ...

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