Spouse of Deceased Reverse Mortgage Borrower Can Pursue Claim Against HUD in Response to Foreclosure Action

A U.S. district court rules that the non-borrowing spouse of a deceased reverse mortgage borrower can pursue a claim against the Department of Housing and Urban Development after the mortgage lender filed a foreclosure action on her house. Wilson v. Department of Housing and Urban Development (U.S. Dist. Ct., N.D. Ill., E. Div., No. 18 C 2149, Feb. 2, 2019).

Walter and Patricia Wilson owned a house together. In 2009, Mr. Wilson took out a reverse mortgage. Ms. Wilson was under 62 years old at the time, so she could not be a signatory to the reverse mortgage. Instead, she signed as a "non-borrowing spouse." After Mr. Wilson died in November 2015. Under federal regulations designed to protect non-borrowing spouses, lenders can elect to assign the reverse mortgage to the Federal Housing Administration (FHA) within 120 days of the borrower’s death. If that deadline is not met, lenders are required to foreclose on the subject property. Ms. Wilson did not notify the mortgage lender about her husband's death until after the 120-day deadline had passed.

The mortgage lender filed a foreclosure action against Ms. Wilson. Ms. Wilson countersued the Department of Housing and Urban Development (HUD), arguing that the federal regulations and the deadline were arbitrary and capricious. HUD filed a motion to dismiss, arguing that Ms. Wilson lacked standing and did not state a claim because the it was the mortgage lender's actions and the terms of the reverse mortgage, not HUD regulations, that caused her injury.

The U.S. District Court, Northern District of Illinois, Eastern Division, denies the motion to dismiss in part, holding that while Ms. Wilson does not have standing to pursue a claim requiring HUD to take assignment of the reverse mortgage, she can pursue other relief. According to the court, Ms. Wilson has standing to pursue a claim against HUD because "HUD’s regulations set the terms of the subject reverse mortgage, and HUD’s regulations required RMS to foreclose upon Ms. Wilson."

For the full text of this decision, go to: https://cases.justia.com/federal/district-courts/illinois/ilndce/1:2018cv02149/350730/47/0.pdf?ts=1549450683

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