APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, D.C. Civil No. 85-5529
Before GIBBONS, Chief Judge, WEIS and HUNTER, Circuit Judges
After declining her request to accept an assignment of her mortgage, the Department of Housing and Urban Development told plaintiff that she could have a face-to-face conference with an agency official if she telephoned for an appointment. In an affidavit plaintiff stated that she did call the agency, but was dissuaded from further action by the unidentified person who answered the phone. Relying on the fact that its records contain no notation of the call, the agency refused a renewed request for a conference. We conclude that by failing to credit the plaintiff's uncontracted affidavit in denying this de minimis accommodation, the agency action was arbitrary and capricious. Accordingly, we will vacate the district court judgment in favor of HUD and will direct that plaintiff be granted a conference.
On the record before us, after the death of Charles Armstead in 1980, his widow, the plaintiff Jean Armstead, became the sole owner of a home at 1531 Lincoln Avenue, Sharon Hill, Pennsylvania. The property is encumbered with a mortgage held by Fidelity Bond & Mortgage Company and insured by HUD under § 220 of the National Housing Act. 12 U.S.C. § 1715k.
The mortgage, originally given in 1965, is for a term of thirty years. Payments were current until September 1984, when plaintiff fell into default with a balance due of $6,300. In December of that year, Fidelity advised plaintiff that the mortgage was subject to foreclosure but that it might be eligible for assignment to HUD under the Mortgage Assignment Program. 12 U.S.C. § 1715u and 24 C.F.R. §§ 203.650.
On request, plaintiff submitted detailed information, and after review, Fidelity decided that she did not meet the prerequisites for assignment. According to Fidelity, plaintiff failed to show that the default was caused by circumstances beyond her control or that there was a reasonable prospect for resumption of regular payments. Fidelity wrote plaintiff that it would not recommended HUD accept an assignment, but that she was free to work directly with the agency.
Plaintiff then contacted HUD and, at its request, completed several pages of forms. She represented that she had last worked in February 1979, when she had left employment to care for her seriously-ill husband. After his death, she had suffered a mild heart attack and subsequently was denied employment because of her health. Her daughter and grandson who live with her, had received Social Security payments until 1982, when those benefits were terminated. The three presently receive $358 monthly from the Pennsylvania Department of Public Welfare.
After considering this and other information, the HUD office in Philadelphia sent a letter to plaintiff on March 29, 1985, explaining that it had decided not to accept an assignment of the mortgage "at this time." However, the letter requested additional data to aid in evaluating whether the default had been caused by circumstances beyond her control and whether she would be "able to catch up on [her] mortgage payments in the future."
The letter continued, "before we can make a final decision we need the following information," and requested various items bearing on the plaintiff's financial situation as well as her physical condition. Finally, the letter said, "you have a right to discuss our decision at a face-to-face meeting with us. YOU MUST ASK FOR THIS MEETING BEFORE April 13, 1985 . . . . When you call or write to request a meeting, we will set a time and place . . . . IF YOU WANT TO HAVE A MEETING, call Mr. Albert Aladjem at [phone number] or write to us . . . If we do not hear from you by April 13, 1985, we will think that you accept our preliminary decision as correct."
Plaintiff contends that she did call the agency, but HUD denies it. On April 25, HUD wrote Fidelity stating that plaintiff had not appealed the preliminary negative decision to refuse assignment.
When Fidelity began foreclosure proceedings in August, plaintiff consulted the Delaware County Legal Assistance Association. In a letter dated August 13, 1985, the attorneys described the plaintiff's April call to HUD. A woman who answered the telephone had advised plaintiff that the agency would not be able to take the assignment because of her income level, and therefore a conference was never held. The Legal Assistance Associates requested HUD to reconsider the case. HUD responded HUD responded two weeks later, refusing to reopen.
Plaintiff then filed a complaint in the district court, asking that HUD be required to conduct a conference and accept an assignment. The district court granted summary judgment for HUD, concluding that it did not err in declining an assignment of the mortgage and that evidence supported its determination that plaintiff had not requested a conference before April 13, 1985.
On appeal, plaintiff does not ask us to reassess the merits of HUD's decision to decline an assignment, but limits her arguments to the agency's refusal to reopen the case and grant the face-to-face conference.
The plaintiff's right to a conference with a HUD representative is granted by regulation. 24 C.F.R. § 203.654(c). When the agency's preliminary review does not favor assignment, the mortgagor may present additional data by mail or phone, "or alternatively . . . . shall be entitled to present such information or argument in person at a conference." The regulations further provide that the conference "shall not be an adversary proceeding or subject to formal rules of evidence." 24 C.F.R. § 203.656. The mortgagor may be represented by an attorney and present oral or documentary information.
Also pertinent to the issue before us are a number of provisions in HUD handbook 4330.2. They state that if the mortgagor later contacts the agency and "indicates 'good cause' for not requesting a conference within the time limit, the Field Office shall proceed with its consideration." That process includes contacting the mortgagee to delay foreclosure and "where the mortgagee ...