first time declared the mortgage in default after Mr. Rickards lost his job.
When an administrative decision is subject to judicial review, the agency must indicate the grounds for its decision so that the court may properly determine whether the agency has abused its discretion. See Matlovich v. Secretary of the Air Force, 192 U.S. App. D.C. 243, 591 F.2d 852, 857 (D.C. Cir. 1978). The HUD examiner wrote "(the accident does not apply)" under the section for comments regarding the applicants' failure to meet the eligibility criteria. It is not at all clear from that notation whether the incident was considered by the HUD examiner and rejected as a potential cause of the default, or whether the incident was determined by the examiner to be entitled to no consideration at all.
The Supreme Court has stated that a reviewing court must assure itself that the agency's decision was "based on a consideration of the relevant factors." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. at 415. A decision of "less than ideal clarity" will be upheld if the agency's rationale "may reasonably be discerned." Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 286, 42 L. Ed. 2d 447, 95 S. Ct. 438 (1974), reh. denied, 420 U.S. 956, 95 S. Ct. 1340, 43 L. Ed. 2d 433 (1975).
In Butler v. HUD, 595 F. Supp. 1041 (E.D.Pa. 1984), the plaintiffs purchased a home which was financed by a HUD-insured mortgage. In 1970, Mr. Butler was severely injured, became partially disabled, and plaintiffs' joint income declined. In 1982, after being threatened with foreclosure, plaintiffs applied to have their mortgage assigned to HUD. HUD rejected the request, determining that the default had not been caused by reasons beyond the control of the plaintiffs and that it was not reasonable to consider any injury that had occurred twelve years before as a possible cause of the default.
In that case, the district court held that HUD's failure to consider whether Mr. Butler's injuries could have caused the default was arbitrary, capricious and an abuse of discretion. The court noted that the circumstances leading to the inability of the mortgagor to remain current may have been set in motion several months or years prior to the actual default. As an illustration, the court posited that an unexpected illness and the resulting expenses and/or loss of income could deplete a mortgagor's savings, making the mortgagor vulnerable to default. In the instant case, Rickards might have had sufficient savings to enable him to continue making mortgage payments despite losing his job had he not incurred substantial legal fees as a result of the incident, assuming that the legal fees might have been paid out of the Rickards' savings. See Butler, C.A. No. 84-0121, slip op. at 8. Cf. James v. HUD, Civil Action No. 4-81-457 (D.Minn., April 1, 1982) (court determined that HUD erroneously rejected plaintiff's illness, which caused her to deplete her savings, as a cause of her default).
The explanation for HUD's decision in this case is certainly of "less than ideal clarity." I am unable to discern what the HUD examiner meant by "(the accident does not apply)." See Lukens Steel Co. v. Kreps, 477 F. Supp. 444, 458 (E.D.Pa. 1979) ("it is not the Court's function to search the record for something which might support the agency's decision, if the agency itself has not clearly set forth its reasons.") (emphasis in original). I am unwilling, and I do not consider it within my province, to speculate as to whether the agency considered the possible effect of Rickards' legal expenses on the default. The matter will be remanded to the agency for clarification of its treatment of the legal expense issue.
Plaintiffs also contend that HUD failed to consider Mrs. Rickards' loss of seasonal employment and complications due to pregnancy as potential causes of the default. Mrs. Rickards worked from October 1983 to January 1984 at a seasonal job. She earned approximately $45.00 a week. Mrs. Rickards' loss of income was not mentioned in plaintiffs' initial application to HUD or at the appeal conference of November 20, 1984. Plaintiffs were able to make mortgage payments from June 1983 to October 1983 when Mrs. Rickards was not working. Plaintiffs assert that Mrs. Rickards' physical problems associated with her pregnancy were a cause of the default since they left her "unable to find other work," but plaintiffs failed to produce any documentation of her physical condition.
The HUD Handbook for administration of mortgage assignment programs provides examples of reasons for default which would be considered beyond a mortgagor's control. These include "curtailment of family income, such as unemployment or underemployment . . . or other loss of income due to divorce, illness or death." In its supplemental brief, HUD asserts that it considered all of the circumstances surrounding plaintiffs' default, stating that "there is no evidence whatsoever that HUD did not consider every one of the factors which the mortgagors give as a reason for the default." This statement misconstrues HUD's burden of demonstrating that it has considered all of the relevant factors. I must satisfy myself that HUD did consider all of the relevant factors in denying the plaintiffs' request for an assignment, and this must be done by an examination of the record. The record is not entirely clear as to how HUD treated Mrs. Rickards' unemployment and alleged complications due to pregnancy, two conditions specifically noted in the HUD Handbook.
See Weigant v. HUD, Misc. Action No. 84-0839 (E.D.Pa., January 10, 1985) (court remanded assignment decision to HUD for clarification because agency failed to explain how it dealt with illness of the mortgagor's wife and resulting loss of income). Since the matter is being remanded, the agency should avail itself of the opportunity to resolve any remaining doubt that it considered and rejected the pregnancy problem as a cause of default.
Plaintiffs also contend that HUD failed to consider Mr. Rickards' alcohol and drug problems as possible causes of the default. Mr. Rickards entered a facility for treatment of his chemical dependency on August 24, 1984 and was released on November 18, 1984. The date of default on the mortgage was May 1, 1984, thirty days after April 1, 1984, which was the due date of the last unpaid installment of the mortgage. See Ferrell v. Pierce, Civil Action No. 73-C-334 (N.D.Ill., March 22, 1985) (describing proper calculation of date of default). Only circumstances occurring prior to the date of default may be considered in determining assignment eligibility. It appears that plaintiffs furnished no information as to when Mr. Rickards became addicted. All that appears in the record is that the problem began sometime after Mr. Rickards lost his job. Although plaintiffs produced no evidence to show how Mr. Rickards' drug and/or alcohol addiction caused the default in May of 1984, there is nothing in HUD's ruling reflecting that it considered and rejected this as a potential cause of the default. Again, since the matter is being remanded, it would be well for HUD to clarify whether it did consider and reject this claim.
When an agency decision fails to address all the relevant factors, even a "restrained exercise of judicial review is impossible." See City Federal Savings & Loan Association v. Federal Home Loan Bank Bd., 600 F.2d 681, 689 (7th Cir. 1979). When the failure of an agency to explain its action frustrates effective judicial review, the court may remand the matter to the agency for clarification of the record. 600 F.2d at 689; Lukens Steel Co. v. Kreps, 477 F. Supp. at 458. Because HUD's explanation for its rejection of the Rickards' application for an assignment of their mortgage is incomplete and unclear, this action will be remanded for HUD's reconsideration and explanation in accordance with the views expressed herein.
This 5th day of December, 1985, it is
ORDERED that the within matter is REMANDED to the United States Department of Housing and Urban Development for reconsideration in light of the views expressed in the foregoing Opinion.