The lawsuit stems from the Department of Housing and Urban Development’s decision to clarify its non-recourse policy for the HECM program in 2008.
Guidance published by HUD requires that an heir, including a surviving spouse who was not named on the mortgage, must pay the full mortgage balance to keep the home, even it if exceeds the value of the property. Borrowers not related to the heir could purchase the home for the price, not the loan amount.
Peter Bell, president of the National Reverse Mortgage Lenders Association told Reuters it believes an equitable resolution would allow that a sale to a family member be on the same terms as a sale to a third party.
“We believe we can even the playing field for families and, at the same time, implement safeguards to ensure a fair market value transaction,” he said. “As we have worked with HUD on improving so many features of the reverse mortgage program, we are eager to work with them and AARP to make sure families are not penalized for being related to borrowers.”