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NBC-USA HOUSING, INC., TWENTY-SIX v. DONOVAN
674 F.3d 869 (2012)
NBC-USA HOUSING, INC., TWENTY-SIX, Appellant
v.
Shaun DONOVAN, in his Capacity as Secretary of the Department of Housing and Urban Development and Roy S. Lilley, in his Capacity as Foreclosure Commissioner for the Department of Housing and Urban Development, Appellees.
No. 11-5116.
United States Court of Appeals, District of Columbia Circuit.
Argued March 8, 2012.
Decided April 6, 2012.
Before: HENDERSON, ROGERS and KAVANAUGH, Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS. ROGERS, Circuit Judge: This is an appeal from the denial of declaratory and injunctive relief against the foreclosure sale of Fortner Manor, an apartment complex for elderly and disabled low-income residents, by the Department of Housing and Urban Development ("HUD"). The complex, funded under Section 811 of the Cranston-Gonzalez National Affordable Housing Act ("Section 811"), 42 U.S.C. § 8013 (2006), was severely damaged by Hurricane Katrina. Upon concluding that NBC-USA Housing, Inc., Twenty-Six ("NBC") had failed to make appropriate arrangements to restore the complex for occupancy, as required under its Section 811 agreements, HUD declared NBC in default on its mortgage in December 2008 and initiated foreclosure proceedings in May 2009. Following the district court's grant of summary judgment and denial of injunctive relief against the foreclosure sale, HUD resumed foreclosure proceedings. In November 2011, HUD sold the property to a third party not before the court. Consequently, the court cannot grant NBC effective relief, and we dismiss the appeal as moot. I.Section 811 authorizes HUD "to provide assistance to private, nonprofit organizations to expand the supply of supportive housing for persons with disabilities" in two ways. 42 U.S.C. § 8013(b)(2). First, HUD can provide a capital advance that "shall bear no interest[,] and its repayment shall not be required so long as the housing remains available for very-low-income persons with disabilities." Id. § 8013(d)(1). "To ensure its interest in the capital advance," HUD requires a receiving organization to sign a mortgage agreement, a regulatory agreement, and a use agreement. 24 C.F.R. § 891.170(a) (2011). Second, HUD can provide project rental assistance in the form of "monthly payments to cover any part of the costs attributed to units occupied . . . by very low-income persons with disabilities that is not met from project income." 42 U.S.C. § 8013(d)(2). In exchange for Section 811 assistance, an organization must agree to operate the housing project for at least forty years. See id. § 8013(e)(1). Throughout this time, HUD requires the organization to ensure that the housing remains "decent, safe, sanitary and in good repair." 24 C.F.R. § 5.703 (2011). In the event the organization breaches a covenant or condition in its mortgage, HUD can foreclose on the property in accordance with the Multifamily Mortgage Foreclosure Act of 1981 ("Mortgage Foreclosure Act"), 12 U.S.C. §§ 3701-17 (2006). NBC is a private non-profit organization of the National Baptist Convention, USA, Inc. In September 1999, NBC signed a Section 811 mortgage with HUD to fund the construction of Fortner Manor, an apartment complex for elderly and disabled low-income residents, located in New Orleans. Pursuant to the mortgage agreement, NBC received a capital advance of $1,535,700, and HUD retained a security
interest in Fortner Manor. In the event of a monetary default of more than thirty days or a "breach of any other covenant herein stipulated," HUD could accelerate NBC's obligation to repay the entire principal sum and would "have the right immediately to foreclose" on the mortgage. NBC-HUD Mortgage Agreement ¶ 21, Sept. 29, 1999. Incorporated by reference was a regulatory agreement, which required NBC to maintain Fortner Manor "in good and substantial repair and condition" and provided that, upon notification, NBC would have thirty days to remedy any violation. NBC-HUD Regulatory Agreement ¶¶ 8, 15, Sept. 29, 1999. Upon NBC's failure to do so, HUD could declare a default of the regulatory agreement, declare the entire indebtedness on the mortgage "immediately due and payable[,] and then proceed with the foreclosure of the mortgage." Id. ¶ 15(c). NBC also entered into a project rental assistance contract ("PRAC") with HUD, which was incorporated by reference in the regulatory agreement and required NBC "to maintain and operate [Fortner Manor] . . . to provide decent, safe, and sanitary housing." NBC-HUD Project Rental Assistance Contract § 2.5(a), Aug. 1, 2001. Fortner Manor suffered extensive damage from Hurricane Katrina in August 2005 and has since remained uninhabitable. HUD and NBC engaged in a series of communications regarding NBC's plans and funding for the rehabilitation of Fortner Manor. After two years had passed, HUD concluded that NBC's responses to its requests for information were inadequate and began sending NBC notices of regulatory agreement violations; the notices gave NBC thirty days to submit an acceptable plan and forewarned NBC that its failure to remedy the violations could lead to a declaration of default allowing HUD to "seek any and all available remedies, including but not limited to, acceleration of the outstanding principal indebtedness, foreclosure or any other appropriate remedies," Notice of Regulatory Agreement Violation, Aug. 7, 2007; see also Notice of Regulatory Agreement Violation, Nov. 8, 2007. In March 2008, HUD sent NBC a notice of default on the PRAC, stating NBC was in default of the Regulatory Agreement and the PRAC and that HUD would "pursue any and all remedies available to it without further notice." Notice of Default of PRAC, Mar. 5, 2008. HUD sent a similar notice to NBC on December 18, 2008, this time declaring that the entire indebtedness on the mortgage was due and payable, and giving NBC twenty-one days to provide a statement why foreclosure should not proceed or seven days to request a meeting with HUD, or foreclosure proceedings would be instituted without further notice. No such response from NBC appears in the record.
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