The opinion of the court was delivered by: Grady, District Judge.
Plaintiff, the United States, on behalf of the Secretary of
Housing & Urban Development ("HUD"), filed this action for
foreclosure of a mortgage because of default by the defendant
mortgagor, Winthrop Towers. We granted plaintiff's motion for
summary judgment on the ground that the decision by the Secretary
to foreclose this mortgage was "committed to agency discretion by
law." United States v. Winthrop Towers, 475 F. Supp. 320, 321
(N.D.Ill. 1979). On appeal, this decision was reversed in part
and the case was remanded for further consideration of two
issues. United States v. Winthrop Towers, 628 F.2d 1028 (7th Cir.
1980). The first issue is whether foreclosure of the Winthrop
Towers mortgage was in derogation of the policies of the National
Housing Act. See 42 U.S.C. § 1441a, 42 U.S.C. § 1437, and
12 U.S.C. § 1715l(a). The second issue is whether HUD abused its
discretion by not providing "Section 8" rent subsidies to the
It is improper for the court to involve itself in a de novo
review of HUD's foreclosure decision. United States v. Winthrop
Towers, 628 F.2d at 1036. Judicial review in this instance is
limited by the Administrative Procedure Act, 5 U.S.C. § 706(2),
which gives us authority to
The burden of proof is on the defaulting mortgagor to establish
that HUD's decision to institute foreclosure proceedings was
arbitrary or capricious, an abuse of its "broad discretion," or
of its failure to comply with the law, United States v. Winthrop
Towers, supra at 1036; United States v. Victory Highway Village,
, 492 (8th Cir. 1981); United States v.
Woodland Terrace, Inc.,
, 509 (4th Cir. 1961), cert.
, 7 L.Ed.2d 338 (1961). After
a complete review of the record, we conclude that defendants have
failed to demonstrate the existence of a genuine issue of
material fact which would preclude summary judgment for
It is undisputed that Winthrop Towers has been in default since
December 1973 on its obligation to make periodic payments on the
mortgage note. Repeated attempts were made by HUD to assist
Winthrop Towers to meet its obligation under the mortgage. In
April 1976, HUD, in another attempt to cure these serious
delinquencies, entered into a provisional workout arrangement
which provided for reduced mortgage payments. Winthrop Towers
defaulted under this arrangement as well. Once a default is
established, ". . . the sole situation presented is one of
remedies." United States v. View Crest Garden Apartments, Inc.,
268 F.2d 380, 383 (9th Cir. 1959), cert. denied, 361 U.S. 884, 80
S.Ct. 156, 4 L.Ed.2d 120 (1959). In deciding whether to foreclose
on a seriously defaulting mortgagor, it is appropriate that HUD
consider as a predominant factor the federal policy to protect
and preserve public monies which make up the assets of HUD's
insurance fund. HUD's attempt to keep losses at a minimum serves
the primary goal of the National Housing Act — to promote private
activity in the building of low and moderate income housing
through the use of federal credit. United States v. Stadium
Apartments, Inc., 425 F.2d 358, 363 (9th Cir. 1970), cert.
denied, 400 U.S. 926, 91 S.Ct. 187, 27 L.Ed.2d 185 (1970); United
States v. Winthrop Towers, 628 F.2d at 1036; United States v.
Victory Highway Village, Inc., 662 F.2d at 494. The undisputed
and long-standing defaults on the original mortgage payments and
the subsequent default in payments under the provisional workout
agreement by Winthrop Towers exhibit serious fiscal problems. HUD
is authorized by statute to foreclose, 12 U.S.C. § 1713(b) and §
1715l(g)(4), and also has a contractual right under the note and
mortgage to seek relief through judicial foreclosure proceedings.
See United States v. Sylacauga Properties, Inc., 323 F.2d 487,
491 (5th Cir. 1963). Prompt judicial enforcement of HUD's
business decision to foreclose on a long-standing defaulting
mortgagor is consistent with the goal of the National Housing
Act.*fn1 It "is essential to the confidence of public and private
lenders" that HUD's right to foreclose not be frustrated. United
States v. Victory Highway Village, Inc., 662 F.2d 485, 495 (8th
Cir. 1981). Minimizing losses for HUD helps to implement the goal
of preserving assets of the insurance fund so that future housing
projects may be insured. Federal Property Management Corp. v.
Harris, 603 F.2d 1226, 1230 (6th Cir. 1979) ("national housing
goals would be advanced by ending these projects so that the
money could be used elsewhere to encourage private enterprise to
create and operate low and moderate income housing projects.").
On the record here, defendants have not shown HUD's decision to
have been arbitrary or capricious, an abuse of discretion or in
violation of law. HUD is entitled to a judgment of foreclosure.
"Section 8" Subsidies
Section 8 provides for subsidies whereby HUD may contract to
assist a project by paying rent which exceeds 25 per cent of a
tenant's income. 42 U.S.C. § 1437b; 24 C.F.R. § 886.
Defendant Winthrop Towers argues that HUD acted in an arbitrary
and capricious manner by not making Section 8 subsidies available
to its project. As the Seventh Circuit pointed out, "HUD has
broad discretion `to choose between alternative methods of
achieving the national housing objectives.'" United States v.
Winthrop Towers, 628 F.2d at 1036, quoting Shannon v. United
States Dep't of Housing & Urban Dev., 436 F.2d 809, 819 (3rd Cir.
1970); United States v. Victory Highway Village, Inc.,
662 F.2d 488, 495 (8th Cir. 1981); United States v. Golden Acres, Inc.,
520 F. Supp. 1073
(D.Del. 1981) ("it is for HUD to choose among rational
alternatives . . . and judicial review is ordinarily
inappropriate to consider whether a foreclosure decision arrived
at through the considered judgment of HUD was necessarily the
best or most effective choice."); United States v. 1300 Lafayette
East, 455 F. Supp. 988, 992 (E.D.Mich. 1978) (HUD has "discretion
to elect from among several courses of action following a
default."). Obviously, HUD has certain budget limitations and
cannot make all possible subsidy programs available to all
mortgagors.*fn2 In this case, HUD has repeatedly offered defendant
alternative financing terms that could have avoided foreclosure.
Defendants have been in default since 1973. They have failed to
make any good-faith attempt to salvage the project*fn3 even though
given ample opportunity to do so. Not even a token payment was
made on the mortgage for many years.*fn4 Defendants concede they
have no right to any additional subsidies under the National
Housing Act, the mortgage note or pertinent case law. United
States v. Woodland Terrace, Inc., 293 F.2d 505 (4th Cir. 1961),
cert. denied, 368 U.S. 940, 82 S.Ct. 381, 7 L.Ed.2d 338 (1961);
Kent Farms v. Hills, 417 F. Supp. 297, 303 (D.D.C. 1976). Their
claim is that HUD abused its discretion by failing to give
adequate consideration to the question of subsidies. However, we
believe HUD was well within its discretion in denying the
subsidies on the basis of defendants' poor fiscal performance.
The purpose of the National Housing Act is to assist private
activity, not to supplant it. Despite the considerable assistance
it had already received from the low interest rate and HUD's
forbearance despite defendants' continuing default, the
defendants showed no signs that they would ever be able to
operate the project successfully.
Defendants' Motion for Leave to Take Additional Discovery
Defendants request permission to take depositions of seven HUD
officials. Substantial discovery has already taken place and we
see no need for further discovery on the issues that were
Plaintiff's motion for summary judgment is granted. Defendants'
motion for further discovery is denied.
Plaintiff should file within 21 days from the date of this
order a proposed decree of foreclosure, with findings of fact and
conclusions of law consistent with this opinion. Defendants may
have 10 days thereafter to file any written objections.