BuckleySandler LLP: District Court Rules that Mortgage Servicer Lacks Standing to Bring Suit Against HUD for Failure to Process or Pay FHA Insurance Benefit Claims

BuckleySandler LLP: District Court Rules that Mortgage Servicer Lacks Standing to Bring Suit Against HUD for Failure to Process or Pay FHA Insurance Benefit Claims

Excerpted from Infobytes, a weekly electronic newsletter on developments in financial services law from BuckleySandler LLP. For the full issue of Infobytes, click here: http://www.buckleysandler.com/infobyte-detail/infobytes-july-29-2011

On July 20, the U.S. District Court for the Northern District of Texas held that a servicer of mortgages insured by the Federal Housing Agency (FHA) lacks standing to bring suit against the Department of Housing and Urban Development (HUD) or its Secretary based upon HUDs' failure to process or pay FHA insurance benefit claims where the servicer fails to allege it is an assignee of the FHA-insured mortgages or that its contract with the mortgagee amounts to an effective assignment.  American Home Mortgage Servicing, Inc. v. Donovan, No. 3:10-CV-1936-M (N.D. Tex. July 20, 2011) [enhanced version available to lexis.com subscribers].  In addition, the court held that dismissal of the servicer's claim was proper o where the servicer fails to clearly plead the basis for a waiver of sovereign immunity and that the failure to process or pay FHA insurance benefit claims constitutes a final agency action under the APA.  AHMSI was granted twenty-one days from the date of the opinion to amend its complaint to allege it had standing when the suit was filed, that there was a waiver of sovereign immunity, and that a final agency action occurred.

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