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HECM Case Involving Non-Borrowing Spouses to Proceed

JAN 7, 2013 1:00pm ET
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An appeals court has overturned the previous dismissal of a case involving the rights of surviving, non-borrowing spouses of Home Equity Conversion Mortgage borrowers.

At deadline, the Department of Housing and Urban Development had not provided any comment in response to inquiries from this publication about the case, Benett et al. v. (HUD secretary Shaun) Donovan.

HUD had argued that the spouses facing foreclosure in the case lacked legal standing, and the ruling from U.S. Court of Appeals in Washington does find that the issue “is limited due to the appellants’ standing.

“But we admit to being somewhat puzzled as to how HUD can justify a regulation that seems contrary to the governing statute,” the judge added in the decision, referencing conflicts in HUD’s rules that are alleged in the suit.

The previous ruling had questioned whether plaintiffs had offered a compelling-enough argument to prove that HUD had the capability to “affect the lenders foreclosing.”

But in the most recent decision, the judge said, “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.”

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