Home > Mortgages > Widows Sue Government, Claim Evictions Illegal

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Eviction_Monik_Markus_CCFlickrThe AARP, the powerful senior citizens organization, sued the federal government Tuesday, alleging that illegal changes to rules regarding reverse mortgages could result in seniors getting evicted from their homes.

The suit was filed against the U.S. Department of Housing and Urban Development (HUD) by the AARP Foundation in U.S. District Court in Washington, D.C. The plaintiffs are two widows in Indiana and New York and a widower in Maryland, all of whom face immediate foreclosure and eviction as a result of HUD’s decision to change rules regarding reverse mortgages.

“HUD has inexplicably turned existing reverse mortgage policies upside down,” Jean Constantine-Davis, a lawyer with the AARP, said in a press release. “These are older individuals with limited means who have been blindsided by arbitrary, retroactive decision making.”

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HUD does not comment on pending lawsuits, according to a spokeswoman.

Reverse mortgages were created more than a quarter-century ago so that seniors with significant equity invested in their homes could tap into that equity to cover living expenses. A reverse mortgage is different from a regular mortgage in which the homeowner pays down the principal each month.  Instead, with a reverse mortgage, the principal grows over time as the homeowner receives a monthly payment. The loan is paid off at the very end, often when the last homeowner dies, moves into assisted living or sells the home.

Since 1989, HUD rules stated that borrowers or their heirs would never owe more than the house was worth at the time of repayment, according to the AARP. But HUD changed that rule in December 2008, so that now borrowers and heirs must pay the full mortgage to keep the home, even if the value has fallen since the mortgage was written.

During the housing boom, that was rarely a problem. But now that 23% of American homes are worth less than their mortgages, some seniors find that reverse mortgages they received to balance their finances are actually sinking them. Unable to find a lender willing to give a loan for more than their house is worth, they are forced to sell the home, pay the difference between purchase and selling price themselves, and give up all of the remaining equity they had invested.

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AARP points out that after seniors lose their home, anyone off the street could buy it at the new, lower value.

“Rather than protecting borrowers, HUD retroactively changed the terms of the loans to make these elderly borrowers’ spouses and heirs pay more to keep their home than an unrelated purchaser would have to pay to purchase the property,” attorney Steven A. Skalet, who is working with AARP on the case, said in a press release. “This is shameful.”

Image: Monik Markus

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  • Cecilia G

    My brother in May 2008 walked mt mother who had already been diagnosed with demetia thru a reverse mortgage never showing POA and at the day of closing promptly had $35,000 wired to her checking and had his son make out a check (with her signature) to a attorney for a retainer on a CSC charge his son was facing. The bank months later sent a letter to my mother asking for a POA. She is now in a nursing home on Medicaid. I had to turn the property back to WFB as it was not worth was was owed on it. I would like to sue them for all my mothers attorney fees and mine and my mothers emotional suffering. Cecilia, Michigan

  • Ruth Seegers

    My father did a reverse mortgage with Fannie Mae when he was 71. My mother at the time was 61. He died in 2004 and my mother has been living in the house for almost seven years. After my father died she went to an attorney to find out if she could continue staying in the house. The attorney did the research and checked the paper work and said there wasn’t a problem. She also received a letter from Sallie Mae that she could stay. Now almost seven years later she has received letters stating that she will be evicted. No reason has been given and that is what I am trying to find out. Every year she has followed the terms and conditions by paying taxes and homeowners insurance. She has also paid this year for the whole year and now they want to throw her out. She went to her attorney and he could not figure out why this is happening. After some research by him hes states that she is liable to this reverse mortgage because at the final signing her name was on the paperwork. She was only 61 at the time of signing. I have been doing my own research because I did not understand what a reverse mortgage is, so hopefully we will understand why.
    Thank you for your time in reading this.

    • Christopher Maag

      Hello Ruth. Thank you very much for telling us your story. It makes me think that maybe we should do a longer feature story about your mother’s experience. If you’re interested, would you please email me so that we can talk further? My email address: chris@credit.com.

      Thank you.

    • Cecilia G

      My mother lost her home to a reverse mortgage. She has demetia, my brother walked her thru it and stole the rest of the money. She is now in a nursing home and penniless. The bank has the house. They realized after the fact that my brother did not present a signed Power of Attorney, a little late and of course I got no response from them.

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