AARP filed suit in Federal District Court in Washington, D.C., yesterday against the Department of Housing and Urban Development, which regulates reverse mortgagers that pay older homeowners a regular sum against the equity in their house and are supposed to shield borrowers from economic upheaval, according to an article in today's edition of The New York Times by David Streitfeld.
The article said that the suit charges that policy changes by HUD are pushing older homeowners into foreclosure. It was filed by the AARP Foundation, the organization's charitable arm, and the law firm of Mehri & Skalet on behalf of the surviving spouses of three homeowners who had bought reverse mortgages and are facing eviction.
The lawsuit focuses on reverse mortgages where only one spouse signed the loan document, the article continued, and argues that "HUD shifted course in late 2008,making changes in its procedures so that surviving spouses who are not named on the mortgage must pay the full loan balance to keep the home even if the property is worth less."
The article said that the lawsuit "accuses HUD of making policy changes that allow underwater homes with reverse mortgages to be sold to strangers in arms-length transactions for less than the full mortgage balance, but that require spouses or heirs in some cases to pay the full amount," adding that "HUD is ignoring its own provisions against displacing a surviving spouse."
It is unclear how many elderly homeowners are facing foreclosure for reasons related to the lawsuit," but Jean Constantine-Davis, a senior lawyer with the foundation, said that hundreds and perhaps thousands of elderly people were in positions similar to those of the three plaintiffs, the article said, adding that "more than half a million people have received reverse mortgages since Congress authorized the program a quarter-century ago.
"Those who get the cash, the article continued, "must be at least 62 and have substantial equity in their houses" and "participants receive either a lump sum or monthly payments from lenders" and "after their death, the house is sold and the mortgage is paid off."
The article said that the suit charges that policy changes by HUD are pushing older homeowners into foreclosure. It was filed by the AARP Foundation, the organization's charitable arm, and the law firm of Mehri & Skalet on behalf of the surviving spouses of three homeowners who had bought reverse mortgages and are facing eviction.
The lawsuit focuses on reverse mortgages where only one spouse signed the loan document, the article continued, and argues that "HUD shifted course in late 2008,making changes in its procedures so that surviving spouses who are not named on the mortgage must pay the full loan balance to keep the home even if the property is worth less."
The article said that the lawsuit "accuses HUD of making policy changes that allow underwater homes with reverse mortgages to be sold to strangers in arms-length transactions for less than the full mortgage balance, but that require spouses or heirs in some cases to pay the full amount," adding that "HUD is ignoring its own provisions against displacing a surviving spouse."
It is unclear how many elderly homeowners are facing foreclosure for reasons related to the lawsuit," but Jean Constantine-Davis, a senior lawyer with the foundation, said that hundreds and perhaps thousands of elderly people were in positions similar to those of the three plaintiffs, the article said, adding that "more than half a million people have received reverse mortgages since Congress authorized the program a quarter-century ago.
"Those who get the cash, the article continued, "must be at least 62 and have substantial equity in their houses" and "participants receive either a lump sum or monthly payments from lenders" and "after their death, the house is sold and the mortgage is paid off."
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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