Posted Mar 17, 2011 11:00 am CDT
An AARP lawsuit filed last week challenges a federal decision on reverse mortgages that is causing some widows and widowers to lose their homes.
The suit claims a rule change by the U.S. Department of Housing and Urban Development imposes tougher requirements on surviving spouses and heirs than on strangers, the New York Times reports. Under the change, homes with reverse mortgages that are worth less than the loan balance can be sold to strangers for less than the mortgage balance, while surviving spouses not named on the reverse mortgage must pay the full loan amount.
Reverse mortgages allow homeowners to receive payments to help meet expenses in exchange for equity in their home.
The Times focuses on the plight of one plaintiff, retired cook Robert Bennett, who did not realize that the reverse mortgage he took out with his wife had taken his name off the title to their home. His wife died shortly after they took out the mortgage. As a result, the payments they were to receive under the reverse mortgage stopped immediately and a mortgage of $300,000 became due.
The couple had paid $20,000 in fees for the mortgage but received only $1,800. The value of the property is about $200,000.
The plaintiffs are represented by AARP Foundation Litigation and the Washington, D.C., law firm of Mehri & Skalet, according to an AARP press release.
New York Times: “A Red Flag on Reverse Mortgages”