Case3:15-cv Document1 Filed09/29/15 Page1 of 9

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1 Case:-cv-0 Document Filed0// Page of MATTHEW K. EDLING (SBN 00) McCARTHY, LLP 0 Malcolm Road, Suite 00 Burlingame, CA 00 Telephone: (0) -000 Facsimile: (0) -0 Attorneys for Plaintiff California Reinvestment Coalition 0 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA CALIFORNIA REINVESTMENT COALITION, Case No.: :-cv-0 v. Plaintiff, COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF UNDER FREEDOM OF UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Defendant. 0

2 Case:-cv-0 Document Filed0// Page of TABLE OF CONTENTS Page I. INTRODUCTION... II. JURISDICTION AND VENUE... III. PARTIES... IV. STATEMENT OF FACTS... V. CLAIM FOR RELIEF... VI. PRAYER FOR RELIEF i

3 Case:-cv-0 Document Filed0// Page of 0 0 Pursuant to the Freedom of Information Act ( FOIA ), U.S.C., and its implementing regulations, the California Reinvestment Coalition ( CRC ) seeks a declaratory judgment finding that the United States Department of Housing and Urban Development ( HUD ) has violated the FOIA and also seeks injunctive relief requiring HUD to grant CRC s fee waiver request and process the FOIA request as soon as practicable. I. INTRODUCTION. Plaintiff CRC has properly sought the disclosure of certain documents under FOIA that contain, or memorialize, consumer complaint information relating to OneWest Bank and Financial Freedom. CRC also seeks disclosure of records pertaining to HUD s efforts to develop policies for non-borrower spouses and heirs of Home Equity Conversion Mortgages ( HECM ) reverse mortgages. As a non-profit, non-commercial requester, CRC is entitled to a waiver of any fees associated with these FOIA requests.. Both CRC s advocacy and FOIA aim to protect consumers and promote an informed citizenry and a more effective and efficient government. CRC is dedicated to ensuring these often marginalized members of society have access to a fair financial system that meets their needs. The effects of deceptive and improper reverse mortgage origination and servicing practices, especially when resulting in foreclosure on borrowers, non-borrowing spouses, their families, and the community at large is enormous. The type of information requested by CRC in its request is necessary in order for CRC to carry out its mission, especially with regard to its advocacy on behalf of low income communities and communities of color. Accordingly, the information sought by CRC in its FOIA request is of great interest to these communities, and to the country as a whole.. To truly promote the goals of a stable housing market and a safe and sound financial system, financial institutions and federal loan programs and their oversight must serve the public s financial interest. Therefore, the information sought by CRC will undoubtedly contribute significantly to the public s understanding of the federal government s role in regulating the servicing of certain HECM reverse mortgages. In addition, the Department of Treasury, the Federal Deposit Insurance Corporation, and other federal regulatory bodies have granted CRC fee

4 Case:-cv-0 Document Filed0// Page of 0 waivers for similar requests to receive similar information and data. And yet, the case for access to this information is perhaps stronger in the reverse mortgages context as the terms of these loans and the regulatory framework governing them are more opaque to consumers and the growing, aging public at large. In the words of Consumer Financial Protection Bureau (CFPB) Director Richard Cordray, Consumer complaints tell us that the complex terms of reverse mortgages continue to be misunderstood. While thousands of consumers have filed complaints with the CFPB regarding problems they experience with their reverse mortgages, and whereas the CFPB makes information on all complaints publicly available via its website and periodic public reports, the primary regulator of HECMs, the Department of Housing and Urban Development, does not make complaint data publicly available. Such complaint data comprises part of the present FOIA request.. Requiring CRC, a non-profit/public benefit entity, to pay a fee before obtaining documents under FOIA is tantamount to a total denial of access to public information. HUD s denial of CRC s fee waiver request violates the very principles sought to be achieved by FOIA. II. JURISDICTION AND VENUE. This Court has both subject matter jurisdiction over this action and personal 0 jurisdiction over the parties pursuant to U.S.C. (a)()(b).. Venue lies in this district because CRC resides in the Northern District of California under U.S.C. (a)()(b).. This Court also has jurisdiction over this action pursuant to U.S.C... This Court has the authority to grant declaratory relief pursuant to U.S.C. 0.. This court has the authority to award costs and attorney fees under U.S.C. (a)()i. 0. Pursuant to U.S.C. (a)()(a)(ii), HUD has denied CRC s appeal of its fee waiver request, and notified CRC of its right to seek judicial review, and therefore CRC has exhausted all administrative remedies available to it, and may bring this lawsuit to enforce FOIA.

5 Case:-cv-0 Document Filed0// Page of III. PARTIES. Plaintiff California Reinvestment Coalition is a non-profit organization that has 0 0 been advocating for fair and equal access to credit for all California communities since. Over nearly 0 years, CRC has grown into the largest state community reinvestment coalition in the country with a membership of 00 nonprofit organizations working for the economic vitality of low-income communities and communities of color.. Defendant United States Department of Housing and Urban Development is a federal agency whose mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. IV. STATEMENT OF FACTS. In March 00, OneWest Bank ( OneWest ) purchased the assets of failed IndyMac Bank and its reverse mortgage lender Financial Freedom from the FDIC.. In mid-august 0, CIT Group Inc. applied to purchase OneWest Bank ( OneWest ) and its affiliate, reverse mortgage servicer Financial Freedom. The merger decision requires a determination as to whether the merger applicants have served community credit needs, and whether the merger will provide a public benefit.. On November, 0, CRC submitted its FOIA request to HUD seeking documents including: a. All documents containing or memorializing the number, nature and resolution of all complaints filed against OneWest and Financial Freedom from April 00 to the present; b. All documents containing or memorializing HUD drafts or timelines for the development of new guidelines to address the issue of non-borrower spouses and heirs for HECM loans that were originated before August, 0; c. All documents containing data or estimates of the number of outstanding HECM mortgages where a borrower s spouse was not listed on the promissory note; d. All documents containing data or estimates of the number of HECM foreclosures since April 00;

6 Case:-cv-0 Document Filed0// Page of 0 0 e. All documents containing data or estimates of the number of HECM foreclosures where the borrower passed away and a surviving spouse was foreclosed upon since April 00; f. All documents containing data or estimates of the number of HECM foreclosures by OneWest, Financial Freedom and their affiliates of (a) borrowers and (b) of non-borrower spouses across the nation from April, 00.. Subsequent to CRC s FOIA request, HUD issued two mortgagee letters relating to the above referenced Non-Borrower Spouse issue. CRC is aware Mortgagee Letters 0- and 0- provide guidance on HUD s policies regarding Non-Borrower Spouses, though much confusion and many questions from Non-Borrower Spouses, their families and their advocates remain.. Pursuant to C.F.R..0(h) ( Public Interest Requirement ), CRC sought and was entitled to a fee waiver under applicable law and regulations. To satisfy the public interest requirement, four factors must be considered: (a) whether the subject matter of the request specifically relates to operations or activities of the government; (b) whether the requested documents will be likely to contribute to an understanding of specific government activities or operations; (c) whether the disclosure will contribute to a greater understanding on the part of the public at large; and (d) whether disclosure of the requested documents will contribute significantly to the public understanding of government activities or operations.. On December, 0, HUD denied CRC s fee waiver request for failing to satisfy the Public Interest Requirement.. CRC appealed HUD s denial of its fee waiver. In its appeal, CRC confirmed: (a) it does not have a commercial interest because it is not making or seeking profit; (b) its request falls within the public interest required for issuing a fee waiver because the information requested will allow for public oversight of the federal government; (c) the intended use of the information will contribute significantly to public understanding of the operations or activities of the government s role in regulating the servicing of certain HECM reverse mortgages; and (d) the information would be disseminated to educate the public via CRC s website and social media. Further, CRC

7 Case:-cv-0 Document Filed0// Page of 0 0 confirmed it would use the information to assist CRC in preparing its comments as part of regulatory process relating to bank mergers and servicing oversight and more generally aid CRC s and the public s understanding of how federal loan programs are serving the needs of the population. 0. On March, 0, HUD further denied CRC s appeal and notified CRC of its right to seek judicial review. HUD stated that CRC failed to meet the last requirement of public interest on whether the disclosure of the requested documents will contribute significantly to the public s understanding of government activities or operations.. HUD further explained that to warrant a waiver or reduction in fees, the public s understanding of the subject matter in question, as compared to the level of public understanding existing prior to the disclosure, must be likely to be enhanced by the disclosure to a significant extent.. On April, 0, CRC notified HUD that since HUD denied CRC s appeal, CRC will file an appeal in federal court.. CRC has exhausted the applicable administrative remedies with respect to its fee waiver request. See U.S.C. (a)(). V. CLAIM FOR RELIEF. CRC repeats, realleges, and incorporate by reference all preceding paragraphs.. FOIA states that [d]ocuments shall be furnished without any charge or at a charge reduced below the fees established under clause (ii) if disclosure of the information is in the public interest because it is likely to contribute significantly to public understanding of the operations or activities of the government and is not primarily in the commercial interest of the requester. U.S.C. (a)()(a)(iii).. HUD regulations implementing FOIA state that fees will be waived or reduced if it determines that () disclosure of the information the requester seeks is in the public interest because it is likely to contribute significantly to public understanding of the operations or activities of the government, and () that the requester is not seeking the information for its own commercial interests. C.F.R..0(h).

8 Case:-cv-0 Document Filed0// Page of 0 0 control.. CRC properly requested a fee waiver for the request of documents within HUD s. CRC is entitled by law to a fee waiver because disclosure of the information is likely to contribute significantly to public understanding of the operations or activities of the government and is not primarily in CRC s commercial interest. Reverse mortgages are more complex and less understood than conventional or forward mortgages, are designed for the more vulnerable senior population, and will become increasingly relevant as the U.S population ages. Similarly, the regulatory oversight of HECMs is less understood by borrowers and the public than the regulation of other mortgages, as many people understand that the banking regulators and the new CFPB have jurisdiction over conventional mortgages. Public complaint data revealing hundreds of thousands of mortgage complaints filed with the CFPB are evidence of the public s understanding of the role of the CFPB in regulating non reverse mortgages. When CFPB proposed servicing rules for non reverse mortgages, many members of the public provided comments.. In contrast, HUD does not make complaint data publicly available and it is unclear if aggrieved reverse mortgage borrowers or the public know where and how to complain if there are problems. Further, HUD s response to the Non-Borrower Spouse policy has been complicated, confusing, and opaque. Whereas federal agencies usually invite public comment on proposed rules before finalizing them, HUD initially issued Mortgagee Letter 0-, and only later invited public comments on the Letter. In contrast to the large number of commenters on the CFPB servicing rules, approximately only ten commenters responded to HUD s proposal, suggesting this is an arena that is relatively unknown to community groups and the public. HUD responded to the comments submitted by mainly defending Mortgagee Letter 0-, only to later, surprisingly, rescind that Letter. Later still, HUD issued new Mortgagee Letter 0-, effectively expanding significantly the pathway to home preservation for non-borrowing spouses, but leaving industry actors, reverse mortgage borrowers and the public confused in light of HUD s procedural machinations. HUD information on the number of complaints it has received and what HUD does with such complaints, the number of HECM foreclosures occurring under HUD s supervision, and how HUD is dealing with the Non-Borrower Spouse issue go directly to how the government

9 Case:-cv-0 Document Filed0// Page of operates in overseeing an important and complex financial product that has such a profound impact on our seniors. All of this is generally unknown to the vast majority of Americans. CRC plans to use and publicize the results of this FOIA request on its website, in public comments on proposed rules and bank mergers, and to HUD itself in commenting on HUD s latest Mortgagee Letter 0- and what obstacles remain to Non-Borrower Spouses remaining in their homes as they and their deceased spouses understood they would be able to do. 0 VI. 0. Therefore, HUD violated FOIA by not granting CRC s fee waiver request. PRAYER FOR RELIEF WHEREFORE, CRC respectfully requests that this Court: A. Declare that HUD has violated FOIA by failing to grant CRC s fee waiver request; B. Order HUD to grant CRC s fee waiver request and process the FOIA request as soon as practicable; C. Award Plaintiff its reasonable attorneys fees and litigation costs incurred in this action, pursuant to U.S.C. (a)()(e); and D. Grant such other relief as the Court may deem just and proper. 0 DATED: September, 0 McCARTHY, LLP /s/ Matthew K. Edling MATTHEW K. EDLING MATTHEW K. EDLING (SBN 00) medling@cpmlegal.com McCARTHY, LLP 0 Malcolm Road, Suite 00 Burlingame, CA 00 Telephone: (0) -000 Facsimile: (0) -0 Attorneys for Plaintiff California Reinvestment Coalition