NPR: Interview With AARP About HUD Lawsuit

NewImageNational Public Radio’s Marketplace ran an interview with AARP’s Jean Constantine-Davis, a senior attorney for the Foundation about its decision to file suit against the Department of Housing and Urban Development for changes made to the HECM program.

VIGELAND: Tell us what has now happened with some of these reverse mortgages.

CONSTANTINE-DAVIS: Well, over the past year or a little more, we’ve been hearing about a lot of folks who are surviving spouses of a person who took the reverse mortgage. I think the most typical scenario is where two people have been married and living in a home for many years and at some point they decide they need to access the equity in their home. And a mortgage broker of some type will convince them that it’s better to put the reverse mortgage in one of their names or they don’t even know that it’s only getting put in one of their names, but in fact, that’s what happens.

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VIGELAND: Instead of both of them signing it.

CONSTANTINE-DAVIS: Yes. And the problem with that is that it’s not just that the mortgage is only in one of their names, it’s that in order for that to happen, the other person’s name is taken off the deed to the property. So essentially, one spouse is being divested of all of his or her interest in the property and usually the older spouse is left on the deed and on the reverse mortgage. And the reason that the broker’s like that is because you can take a higher amount if you’re older. The amount that you can take out in a reverse mortgage is a function of the value of your property and your age.

VIGELAND: Alright, so what has happened now is that there was a change in the rules at the Department of Housing and Urban Development. Tell us what that did.

CONSTANTINE-DAVIS: The rule has always been with reverse mortgages, neither you nor your heirs will ever owe more than the value of your property. So, in 2008, HUD said that’s only true if you sell the property. If you want to keep the property, if your heirs want to keep the property, they have to pay off the full mortgage balance. HUD also said that if you want to buy the property from the estate, you have to pay the full mortgage balance rather than the appraised value of the property. This rule came, as you imagine, at a uniquely bad period of time, when values in housing market had already plummeted and they have dropped even further since that time.

To read a copy of the rest of the interview, check out the link below.

AARP challenges HUD on reverse mortgages

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  • It is interesting that the interview focuses on Mortgagee Letter 2008-38. The sole spouse on a HECM is a sad story when the surviving spouse is not the borrower but what does that have to do with the mortgagee letter? Some say it makes it impossible for the surviving non-borrower spouse to keep the house but it is also hard to find a 100% loan or to qualify for one that is less.

    ML 2008-38 is far broader than spousal issues. It is one which impacts borrowers who are living at loan termination, as well as heirs, including spouses. Rarely is a non-borrowing surviving spouse situation about ML 2008-38 alone. This case is no different.

    The case should be more about 12 USC 1715z-20(j) which discusses displacement of the homeowner which includes not only the borrower but also “the spouse,” which appears to encompass a surviving non-borrower spouse than ML 2008-38 AND it is. But this case is about even more.

    Two of the three plaintiffs in the suit allege fraud against the lender(s) and the originator. For example to take an individual off of title without their knowledge is a question of fraud. Also encouraging the competent spouse to come off of title to have an incompetent spouse become the sole HECM borrower does not sound anything other than fraudulent either.

    The only case which does not involve an allegation of fraud is the case where the HECM was in place before the borrowing spouse married the surviving spouse. Again this seems more about a displaced spouse than the nonrecourse nature of a HECM, although it could be about both.

    • I just filled out the box below about reverse mortgage, did you get it.? I guess not. When we did a reverse morgage on the mobile that my Mother left to me, and becaue it was a community state, I put my husband on, and the reverse mortgage when we went in, said better to put it in his name, since he is older. We did and did not know the house would not go to me if something happened to him. Now my house will be taken away from me, I have no where to go, don’t have credit, house not worth but is owed, and can’t get a loan. My house I have to move once I contact Wells Fargo. I just lost my husband now my house will be also taken from me. Is there anything I can do, or talk too that can give me some suggestions on what to do. Thank You.

  • Courtier123,

    What source do you have for the primary reason that a spouse comes off of title? Most of us believe your statement is accurate but that belief does not make it fact. Until there is some evidence indicating the veracity of the statement it must be categorized as probable but still little more than hearsay.

    Your last sentence while interesting comes from what survey or independent source? It seems more anecdotal than reliable. While a great comeback, it is little more.

  • Courtier123,

    What source do you have for the primary reason that a spouse comes off of title? Most of us believe your statement is accurate but that belief does not make it fact. Until there is some evidence indicating the veracity of the statement it must be categorized as probable but still little more than hearsay.

    Your last sentence while interesting comes from what survey or independent source? It seems more anecdotal than reliable. While a great comeback, it is little more.

  • Courtier123,

    What source do you have for the primary reason that a spouse comes off of title? Most of us believe your statement is accurate but that belief does not make it fact. Until there is some evidence indicating the veracity of the statement it must be categorized as probable but still little more than hearsay.

    Your last sentence while interesting comes from what survey or independent source? It seems more anecdotal than reliable. While a great comeback, it is little more.

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