AARP Sues to Protect Widowed Homeowners With Reverse Mortgages

At the time AARP took up their cause, Robert Bennett of Annapolis, Md., and Leila Joseph of Brooklyn, N.Y., had several things in common. They were older Americans. They were widowed. They were homeowners. And they both faced foreclosure and eviction on reverse mortgage loans.

So when AARP won a big lawsuit on their behalf against the U.S. Department of Housing and Urban Development (HUD) several months ago, it was great news.

Now, AARP Foundation Litigation has filed a class-action suit on behalf of all widowed homeowners who were harmed by HUD's reverse mortgage policy - one that caused many of them hardship when mortgage lenders foreclosed on their homes.

A reverse mortgage allows homeowners who are 62 or older to borrow against the equity in their homes and continue to live in them without having to make payments, provided that the home remains their primary residence. (Many experts, incidentally, feel that the minimum age for a reverse mortgage should be higher.) But what if the couple has an age difference and more equity is available if they base the loan on the age of the older spouse? Or one spouse is old enough to qualify for a reverse mortgage and the other isn't? Many lenders have suggested that the reverse mortgage be in the name of the older spouse, and to accomplish this the younger spouse's name must be removed from the title.

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But here's the problem, and it's a big one:

According to HUD regulations (the ones recently struck down by a federal appeals court in Washington, D.C.) and the mortgage documents HUD has created for lenders to use, when an older spouse with a reverse mortgage dies, the lender can require the younger spouse - whose name was not on the mortgage - to repay the loan or lose the home through foreclosure and eviction.

"The result of HUD's failure," AARP's lawsuit alleges, "is that a multitude of surviving spouses of reverse mortgage borrowers are now facing foreclosure and displacement from homes they expected to live in for the rest of their lives. "

According to AARP attorney Jean Constantine-Davis, it's likely that thousands of widows and widowers are or will be affected by this illegal regulation. That's why the new suit, citing the federal appeals court decision, has been filed a class action - to help as many of them as possible.

Photo:  fstop123 /iStockPhoto

 

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