In March 2014 four surviving spouses of FHA-insured Home Equity Conversion Mortgage borrowers filed a lawsuit against the Department of Housing and Urban Development (HUD) In the lawsuit, the plaintiffs claim the Reverse Mortgage loan has caused them undue harm due to a statue that will force them to leave their home.
In this suit the plaintiffs seek relief on the impending foreclosure on their homes. They claim that, because their name had been removed from their home’s title or because they were not named on the title of the home prior to the closing of the Reverse Mortgage loan, and they survived their borrower-spouses, the loans have been closed and they face losing their homes.
Charlie Plunkett of Miami Florida, Clarisa Welte of Temecula California, Roselaine Labonte of Haverhill Massachussets and Winnie Barlock of Las Vegas Nevada worte, in their class action suit, that they “challenge HUD’s failure to protect them and other surviving spouses of Reverse Mortgage borrowers from foreclosure and displacement, as required by the Reverse Mortgage statute.”
The AARP is representing these plantiffs as they seek relief for themselves as well as those who are similarly affected by the clause in the Reverse Mortgage agreement
Craig Briskin, an AARP attorney who is representing the plaintiffs, said “The motion is filed under federal law to say whatever relief these folks are getting will be extended to those similarly situated.” Briskin believes that ultimately, the suit could affect thousands of individuals who have faced, or are facing, similar situations.
In the suit the plaintiffs write that “subject j [of the Reverse Mortgage law] means what it says: the loan obligation is deferred until the homeowner’s and the spouse’s deaths.” They claim that the Department of Housing and Urban Development violated federal law by foreclosing on the homes they had shared their late spouses—the reverse mortgage borrowers—even though they themselves were not listed on the home’s title.
The suit follows up on an October 2013 ruling by the Court of Appeals regarding a similar lawsuit in which two surviving spouses contested the HUD’s policy of not allowing surviving spouses to remain in their homes after the death of the borrowing spouse. In that suit the Court of Appeals ruled that the surviving spouses must be protected as homeowners. The plaintiffs sought a declaratory judgment that HUD’s regulation violates federal law and demanded that HUD take steps to protect surviving spouse homeowners as required by law. The Appeals Court judge ruled that HUD must grant relief and identify a “remedy” to the issue, though it’s still not clear what that remedy might involve.
Relating to the previous case, Jean Constantine-Davis, senior attorney with AARP Foundation Litigation said “The decision marks a turning point for surviving spouses such as our clients and ensures that they will receive the protections guaranteed by the law: that they will be able to remain in their homes, despite the loss of their husband or wife” At that time the AARP expressed the belief that the decision will ultimately affect an “untold but substantial number” of similar surviving spouses.
Although HUD now requires that potential borrowers undergo a counseling session with a HUD-approved counselor who will explain and expand on the various issues involved, borrowers who took out their HECM loan before the counseling requirement was introduced in 2009 are still facing uncertainty. The AARP hopes that the new suit will provide relief to spouses who are facing foreclosure due to the HUD’s previous lack of clarity on the issue of spousal involvement in the Reverse Mortgage.