When the Balanced Budget Downpayment Act became effective in 1996, the United States Department of Housing and Urban Development ("HUD") terminated a mortgage foreclosure relief program that it had been operating pursuant to a consent decree since 1976. The district court granted a preliminary injunction requiring HUD to reinstate the program or an equivalent substitute until further order from the court. For the reasons set forth in the following opinion, we reverse the judgment of the district court and remand the case for further proceedings consistent with this opinion.

* BACKGROUND

In 1973, the plaintiff class filed suit against the Secretary of Housing and Urban Development ("the Secretary"). The plaintiffs alleged that HUD was statutorily required by the National Housing Act and other federal housing legislation to provide mortgage foreclosure relief to homeowners with HUD-insured mortgages. See Ferrell v. Pierce, 743 F.2d 454, 455-56 (7th Cir. 1984). The parties reached a settlement agreement, which was entered as a consent decree with the district court's approval in 1976. See id. at 457. The consent decree incorporated a detailed plan for HUD to fulfill its obligation to provide foreclosure avoidance relief through the operation of a mortgage assignment program. See id. A mortgage assignment program provides foreclosure relief by allowing HUD to pay off the mortgage debt of a mortgagor in default, take assignment of the mortgage from the mortgagee, and then work out a payment plan or forbearance agreement with the mortgagor. See id. at 456.

In 1979, with the court's approval, the parties agreed to an Amended Stipulation, which superseded the consent decree. The Amended Stipulation imposed specific procedural and substantive restraints on HUD's operation of the mortgage assignment program. The Amended Stipulation also provided that, after the five- year period following the entry of the Amended Stipulation, HUD must continue to "provide assistance or relief in the form of the present assignment program or an equivalent substitute to permit mortgagors in default on their mortgages to avoid foreclosure and to retain their homes during periods of temporary financial distress." Id. at 458. At the time of the Amended Stipulation, the statutory authority for HUD's operation of the mortgage assignment program was contained in the former Section 230 of the National Housing Act, 12 U.S.C. sec. 1715u (1968). See Ferrell v. Pierce, 560 F. Supp. 1344, 1350 (N.D. Ill. 1983).

Subsequently, Congress enacted the Housing and Community Development Act of 1980, Pub. L. No. 96-399, 94 Stat. 1614, 1659, which amended Section 230 of the National Housing Act to authorize HUD to provide foreclosure avoidance relief in the form of Temporary Mortgage Assistance Payments ("TMAP") in addition to the mortgage assignment program. See Ferrell, 560 F. Supp. at 1350. TMAP differed from the mortgage assignment program in that it allowed HUD to take over temporarily part or all of the mortgagor's payments and to make those payments to the mortgagee directly, rather than paying off the entire mortgage and taking assignment of the mortgage. See id. In 1983, HUD promulgated regulations to implement TMAP and sought to modify the 1979 Amended Stipulation to allow HUD to operate TMAP and the mortgage assignment program simultaneously. See id. at 1354-55. The district court denied HUD's motion to modify the consent decree, concluding that the new regulations would lower the overall quality of relief available, thus violating the requirement in the Amended Stipulation that HUD continue to provide the mortgage assignment program or an equivalent substitute. See id. at 1363-64, 1371- 72.1 This court affirmed. See Ferrell, 743 F.2d at 466.

In 1996, Congress enacted the legislation at issue in this appeal--the Balanced Budget Downpayment Act, I, Pub. L. No. 104-99, 110 Stat. 26 (Jan. 26, 1996) ("the Downpayment Act"). Section 407 of the Downpayment Act amended Section 230 of the National Housing Act, 12 U.S.C. sec. 1715u (1988). The former Section 230, titled "Temporary mortgage assistance payments and acquisition of mortgages to avoid foreclosure," authorized the Secretary to operate TMAP and the mortgage assignment program. The amended Section 230, 12 U.S.C. sec. 1715u (Supp. 1999), titled "Authority to assist mortgagors in default," authorizes the Secretary to operate a partial claim program2 and to accept assignments of defaulted mortgages when the mortgagee has modified the mortgage to cure the default and to provide for mortgage payments within the mortgagor's reasonable ability to pay. See id. sec. 1715u(b) & (c).

The amended Section 230 also requires mortgagees to engage in certain loss mitigation actions to provide alternatives to foreclosure upon the default of any HUD-insured mortgage but expressly excludes from such required actions the assignment of mortgages to the Secretary. See id. sec. 1715u(a). Notably, the new Section 230 provides that "[n]o provision of this chapter, or any other law, shall be construed to require the Secretary to provide an alternative to foreclosure for mortgagees with mortgages . . . insured by the Secretary under this chapter, or to accept assignments of such mortgages." Id. sec. 1715u(f). The section also provides that "[n]o decision by the Secretary to exercise or forego exercising any authority under this section shall be subject to judicial review." Id. sec. 1715u(d).

Additionally, Section 407 of the Downpayment Act amended Section 204(a) of the National Housing Act, 12 U.S.C. sec. 1710(a), to authorize the Secretary to pay insurance benefits to a mortgagee in recompense for actions taken to provide alternatives to foreclosure of a defaulted mortgage, but excluded from those recompensable actions the assignment of a mortgage to the Secretary.

As of April 26, 1996, the effective date of the Downpayment Act, HUD stopped accepting applications for mortgage assignments. HUD then promulgated an interim regulation, effective August 2, 1996, establishing a comprehensive approach to foreclosure avoidance and loss mitigation. In accordance with the Downpayment Act's amendments to the National Housing Act, the interim regulation provided for a variety of foreclosure avoidance and loss mitigation techniques, including special forbearance plans, loan modifications, partial claims, pre- foreclosure sales, and deeds in lieu of foreclosure. See 61 Fed. Reg. 35014 (July 3, 1996). The regulation encouraged private lenders to use these techniques with mortgagors in default and made available insurance benefits to lenders whose efforts result in outcomes other than foreclosure.3

On September 27, 1996, HUD filed a motion to vacate its obligation under the Amended Stipulation to operate the mortgage assignment program or an equivalent substitute. On October 2, 1996, the plaintiffs filed a motion to hold HUD in civil contempt for failing to comply with the Amended Stipulation. The plaintiffs' motion included a request that the district court order HUD to reinstate the assignment program or an equivalent substitute pending the court's ruling on HUD's motion to vacate the Amended Stipulation. The district court treated the request for reinstatement as a motion for a preliminary injunction and agreed to rule first on that issue while the other motions remained under consideration.

On November 21, 1996, the district court issued a memorandum opinion and order denying the plaintiffs' request for reinstatement of the assignment program on the ground that the plaintiffs had not presented evidence of irreparable injury, which is required to grant a preliminary injunction. The plaintiffs subsequently filed a renewed motion supported by evidence of irreparable harm that would result from HUD's termination of the assignment program. The district court's grant of this motion is the subject of the present appeal.

On March 31, 1998, the district court issued a memorandum opinion and order granting a preliminary injunction against HUD. The preliminary injunction required HUD to reinstate "either the assignment program or an 'equivalent' substitute, in the form of a mandatory partial claim program, until further order from [the] court." Ferrell v. HUD, No. 73 C 334, 1998 WL 160916, at *8 (N.D. Ill. Mar. 31, 1998).

The district court first held as a preliminary matter that, even after Section 407(a) of the Downpayment Act withdrew the express statutory authority for the operation of the mortgage assignment program, HUD still retained the authority to operate the program or an equivalent substitute. The court concluded that, "[a]lthough statutory authority to operate the assignment program is no longer found in 12 U.S.C. sec. 1710(a), such authority may be found in other statutory provisions." Ferrell, 1998 WL 160916, at *5. Specifically, the court found that 42 U.S.C. sec. 1441 and 42 U.S.C. sec. 3535, when read together, provide authorization for HUD's continued operation of the assignment program.4 The court further concluded that HUD also retains statutory authority to operate an equivalent substitute in the form of a mandatory partial claim program pursuant to 12 U.S.C. sec. 1715u(b).

The district court then addressed a second preliminary issue--whether the court had the power to order HUD to comply with the Amended Stipulation, given that the Downpayment Act both specifically precludes judicial review of any decision by the Secretary regarding assistance to mortgagors in default, see 12 U.S.C. sec. 1715u(d) (Supp. 1999), and provides that no law shall be construed to require the Secretary to provide an alternative to foreclosure or to accept mortgage assignments, see id. sec. 1715u(f). The court held that the Downpayment Act did not alter HUD's obligation to seek modification of the Amended Stipulation by the court before terminating the assignment program. See Ferrell, 1998 WL 160916, at *5. The court emphasized that "court orders remain effective until they are modified by the court" and that litigants must observe the proper judicial procedures by moving to vacate orders, even when such orders are void. Id.

The district court then reached the issue whether to grant a preliminary injunction requiring HUD to reinstate the mortgage assignment program or an equivalent substitute. The court concluded that the plaintiffs had satisfied the standard for a preliminary injunction by demonstrating some likelihood of success on the merits, the absence of an adequate remedy at law, and irreparable harm if the preliminary injunction were not granted. First, the court noted that the plaintiffs had submitted compelling and unrebutted evidence of irreparable injury to class members who would lose their homes if the assignment program were not reinstated. Second, the court found that no adequate remedy at law exists for the loss of one's home due to the denial of foreclosure assistance. Third, the court found that the plaintiffs were likely to prevail on the merits of their contempt motion, given HUD's failure to petition the court for modification of the Amended Stipulation before terminating the assignment program. See id. at *7-8. The district court therefore granted the plaintiffs' motion for a preliminary injunction requiring HUD to reinstate the assignment program or an equivalent substitute in the form of a mandatory partial claim program until further order from the court. See id. at *8.

When deciding whether to grant or deny a preliminary injunction, a district court must consider whether the moving party has demonstrated (1) some likelihood of prevailing on the merits, (2) the absence of an adequate remedy at law, and (3) irreparable harm if preliminary relief is not granted. See Grossbaum v. Indianapolis-Marion County Bldg. Auth., 100 F.3d 1287, 1291-92 (7th Cir. 1996), cert. denied, 520 U.S. 1230 (1997); Erickson v. Trinity Theatre, Inc., 13 F.3d 1061, 1067 (7th Cir. 1994). If the court is satisfied that these factors have been established, the court must then balance the harms to both parties using a "sliding scale" analysis: the greater the moving party's likelihood of prevailing on the merits, the less strongly it must show that the balance of harms weighs in its favor. See Storck U.S.A., L.P. v. Farley Candy Co., 14 F.3d 311, 314 (7th Cir. 1994); see also AlliedSignal, Inc. v. B.F. Goodrich Co., 183 F.3d 568 at 573-74 (7th Cir.1999); Roth v. Lutheran Gen. Hosp., 57 F.3d 1446, 1453 (7th Cir. 1995). The court must also consider the public interest by weighing the effect that either granting or denying the injunction will have on nonparties. See Erickson, 13 F.3d at 1067.

When reviewing a grant or denial of a preliminary injunction, we review the district court's findings of fact for clear error and its discretionary balancing of factors for abuse of discretion. See Grossbaum, 100 F.3d at 1292. The district court's legal conclusions are subject to de novo review. See id.

We note at the outset that the substantive "merits" of this case boil down to the basic question whether HUD should be required to continue operating the mortgage assignment program as it existed under the Amended Stipulation. The district court defined the "merits" as the plaintiffs' contempt motion. See Ferrell, 1998 WL 160916, at *7. Accordingly, in determining the plaintiffs' likelihood of prevailing on the merits thus defined, the district court focused on HUD's procedural shortcomings in failing to move promptly to vacate the Amended Stipulation before terminating the assignment program. The court found that the plaintiffs would likely prevail on the issue of contempt, given HUD's "blatant disregard of the court's order without seeking prior vacation of the order." Id. at *8.

We believe that, in assessing the probability of success on the merits, the district court should have focused on the plaintiffs' ultimate request that HUD continue to operate the mortgage assignment program or an equivalent substitute in accordance with the Amended Stipulation. It is the likelihood of prevailing on the merits of this request that might justify a preliminary injunction requiring HUD to reinstate the program pending resolution of the underlying motions. Even if HUD might be found in contempt for its delay in seeking modification of the Amended Stipulation, this shortcoming would not justify a preliminary injunction unless it is also true that the plaintiffs have some likelihood of prevailing on the ultimate issue of HUD's obligation to continue the assignment program. If there is no likelihood that HUD can be required to continue the program, then a preliminary injunction cannot be sustained even if HUD's actions warrant a finding of contempt.5

With these considerations in mind, we turn now to the issue whether the plaintiffs have any likelihood of prevailing on the merits of their claim that HUD must continue the mortgage assignment program in accordance with the Amended Stipulation. We therefore must first determine whether Congress, in enacting the Downpayment Act, withdrew HUD's statutory authority to operate the assignment program.

Various provisions of the Downpayment Act manifest Congress' intent to terminate the mortgage assignment program required by the Amended Stipulation. Section 407(b) of the Downpayment Act amended Section 230 of the National Housing Act (12 U.S.C. sec. 1715u), which had previously provided the authority for HUD's operation of the mortgage assignment program. Although the new Section 230 permits mortgage assignments under certain limited circumstances, see 12 U.S.C. sec. 1715u(c), Congress made clear in other provisions of the amended Section 230 that it wanted HUD to terminate the mortgage assignment program previously operated pursuant to the Amended Stipulation and under the authority of the former Section 230. Specifically, the amended Section 230 provides that no law shall be construed to require the Secretary to provide an alternative to foreclosure or to accept mortgage assignments. See id. sec. 1715u(f). Section 230 also precludes judicial review of any decision by the Secretary to exercise or forgo exercising any authority under the section. See id. sec. 1715u(d). Moreover, the amended provisions require mortgagees to take certain foreclosure avoidance and loss mitigation actions but expressly exclude from those required actions the assignment of mortgages to the Secretary. See id. sec. 1715u(a).

Additionally, Section 407(a) of the Downpayment Act amended Section 204(a) of the National Housing Act (12 U.S.C. sec. 1710(a)) to authorize HUD to pay insurance benefits to mortgagees who take foreclosure avoidance actions but excluded from such recompensable actions the assignment of mortgages to the Secretary.

We read these provisions of the Downpayment Act as expressing Congress' intent to remove the previous statutory authority for operation of the mortgage assignment program and to establish a new approach to assisting mortgagors in default. Indeed, the district court acknowledged that Section 204(a) of the National Housing Act (12 U.S.C. sec. 1710(a)), as amended by Section 407(a) of the Downpayment Act, no longer authorizes the operation of the mortgage assignment program. See Ferrell, 1998 WL 160916, at *4.

We turn now to the plaintiffs' contention, and the district court's holding, that other statutory provisions left intact by the Downpayment Act provide sufficient statutory authority for the continued operation of the mortgage assignment program. We are unpersuaded that the general authority conferred by 42 U.S.C. sec. 1441 and 42 U.S.C. sec. 3535 is sufficient to support HUD's continued operation of the assignment program. Those provisions, in very general terms, direct HUD to exercise its powers consistently with national housing policy and authorize HUD to make such rules and regulations as are necessary to carry out its duties. We believe that a far more reasonable interpretation of the statutory scheme is to conclude that Congress expected the more particular provision to govern the more general. Indeed, to conclude that Congress, in withdrawing the specific statutory authority for the assignment program by amending Section 230 of the National Housing Act, still intended that HUD retain the authority to operate the program under these other general provisions would impute to Congress-- undeservedly--uncertainty and confusion in articulating national housing policy that the statutory text, fairly read, simply does not convey.

The plaintiffs next submit, and the district court found, that, even if the Downpayment Act removed HUD's statutory authority to operate the assignment program, HUD still retains authority to operate an "equivalent substitute" in the form of a mandatory partial claim program under sec. 407(b) of the Downpayment Act (12 U.S.C. sec. 1715u(a), which is now codified at 12 U.S.C. sec. 1715u(b) (Supp. 1999)). We cannot accept this argument. Section 1715u(b) of Title 12 states that the "Secretary may establish a program for payment of a partial claim to a mortgagee that agrees to apply the claim amount to payment of a mortgage . . . ." Id. (emphasis added). This statutory language does not support the plaintiffs' argument that HUD is empowered to structure a partial claim program as a mandatory program. The district court and all parties seem to agree that the authority granted to HUD under this subsection is permissive, not mandatory, in nature. From HUD's perspective, the section permits--but does not require--the Secretary to administer such a program.6 Secondly, from the perspective of the mortgagee, such a program hardly would be mandatory. The Secretary must supply sufficient economic incentive to make acceptance of the partial payment advantageous to the mortgagee. In short, the authority, and the obligations, of the Secretary under the newly enacted provisions are not the same as those under the earlier statutory scheme that the Amended Stipulation was intended to enforce.

We conclude that Congress' enactment of the Downpayment Act has rendered HUD's continued operation of the mortgage assignment program statutorily unauthorized.7 This court has recognized the principle that a change in the law can require modification of a consent decree. See David B. v. McDonald, 116 F.3d 1146, 1149-50 (7th Cir. 1997), cert. denied, 118 S. Ct. 692 (1998); Ferrell, 743 F.2d at 464 (citing System Federation No. 91 v. Wright, 364 U.S. 642 (1961)). Indeed, the Supreme Court has held that "[a] consent decree must of course be modified if, as it later turns out, one or more of the obligations placed upon the parties has become impermissible under federal law." Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 388 (1992). In this case, the amendments to the National Housing Act constituted a change in the law that has made HUD's continued compliance with the Amended Stipulation an impossibility. We therefore hold that there is no likelihood of the plaintiffs' prevailing on the merits of their motion to require HUD to reinstate the assignment program. Because we hold that the plaintiffs have no likelihood of success on the merits, we need not review the district court's findings regarding irreparable harm or the absence of an adequate remedy at law in order to conclude that the issuance of the preliminary injunction was erroneous. The district court's grant of a preliminary injunction must be reversed.

HUD's delay of almost eight months after Congress passed the Downpayment Act before petitioning the district court for modification of the Amended Stipulation gives us pause. However, HUD's delay in seeking modification of the consent decree cannot justify a preliminary injunction requiring HUD to do something that it no longer has the statutory authority to do. See System Federation No. 91, 364 U.S. at 651; Ferrell, 743 F.2d at 464. Nor, under the circumstances presented here, does it warrant the imposition of a contempt citation against HUD. See Collins v. Barry, 841 F.2d 1297, 1300 (6th Cir.), cert. denied, 488 U.S. 826 (1988). The purposes of a civil contempt order are to "coerce compliance with the underlying order and/or to compensate the complainant for loss sustained by disobedience." Blocksom & Co. v. Marshall, 582 F.2d 1122, 1124 (7th Cir. 1978). When the underlying order is erroneously issued or is no longer valid, a civil contempt order would serve neither of those purposes. See id.; see also Squillacote v. Local 248, Meat & Allied Food Workers, 534 F.2d 735, 746 (7th Cir. 1976); Lewis v. S.S. Baune, 534 F.2d 1115, 1119 (5th Cir. 1976). Moreover, the plaintiffs' contempt motion was part and parcel of its effort to enforce the Amended Stipulation and to receive compensation for HUD's termination of the assignment program. Now that we have resolved in HUD's favor the question of HUD's obligation to continue the assignment program under the Amended Stipulation, a contempt order would not be appropriate.

For the foregoing reasons, we reverse the judgment of the district court and remand for further proceedings.