AARP, an organization representing seniors, has filed a lawsuit against the Department of Housing and Urban Development saying that HUD’s policy changes with reverse mortgages have pushed more older home owners into foreclosure. HUD regulates reverse mortgages, which pay older home owners a regular sum against the equity in their house.
The lawsuit centers on reverse mortgages where only one spouse signed the loan document. The AARP argues that HUD’s policy change in late 2008 has caused surviving spouses who are not named on the mortgage to be required to pay the full loan balance in order to stay in the home, even when the property is underwater.
Reverse mortgages were intended to be nonrecourse, so that even if a home’s value drops the borrower would only lose the house and would not be required to pay anything additional.
The lawsuit says HUD’s policy changes are unfair because they allow underwater homes with reverse mortgages to be sold to others for less than the full mortgage balance, while requiring spouses or heirs to the property to pay the full amount.
''HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people,'' says Jean Constantine-Davis, a senior lawyer at the AARP Foundation.
Source: “AARP Sues U.S. Over Effects of Reverse Mortgages,” The New York Times (March 9, 2011)
2 comments:
Hello,
A reverse mortgage is a loan that's secured by the home's value. Instead of a regular mortgage, in which homeowners repay a lender with monthly payments. Thank you...
The problem seems to be in the title. If only one spouse signed the reverse mortgage, then dies, the surviving spouse can be deemed to be required to pay back the loan. If they can't, they will lose the home. I believe thet's the genesis of the lawsuit.
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