In New Reverse Mortgage Lawsuit, Will AARP Find Its Class?

While a lawsuit brought by AARP was able to influence the Department of Housing and Urban Development (HUD) earlier this year, a pending class action case might not be so fruitful, according to those familiar with the suit.

Filed in early August, the current lawsuit alleges that Wells Fargo Bank and Fannie Mae have illegally foreclosed upon the heirs of reverse mortgage borrowers without offering those heirs their right to purchase the home for fair market value.

The plaintiff in the case for AARP is Robert Chandler of Elk Grove, California. According to court documents, Chandler, who was living in the home that was later foreclosed upon, inherited the home from his mother, who had had a reverse mortgage and passed away in 2010. The suit alleges that Chandler was never given notice of his right to purchase the property for 95% of the appraised value.

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The current suit also notes several attempts on Chandler’s behalf to contact Wells Fargo and Fannie Mae and seek his right to do so.

The next step in the suit is the certification of the class, which must be done by the court. But the certification can take weeks or months, and it may not be such an easy task.

“The Court’s ruling on class certification often comes down to whether the proofs for the representative case are similar enough to the proofs of the other class members,” says Anthony Laura, partner with Patton Boggs LLP.

In the case of plaintiff Chandler, there are several issues at work that could distinguish his case from other potential members of the class. First, that he was residing in the home he inherited from his mother, the reverse mortgage borrower.

“The relief that Mr. Chandler is seeking may not be typical of the relief the others are seeking,” Laura says. “He’s being forcibly evicted from what happens to be his home. Often times, heirs don’t necessarily live in the home but they may want to pay off the mortgage somehow. He’s in a different situation than others who don’t intend to live in the home.”

A second issue lies in the fact that Chandler’s case notes three points of contact with the lender and insurer of the loan. Again, this may not be the case for other heirs in a similar situation.

“The more points of contact among them, the better chance that the facts pertinent to Chandler’s claim will be disparate from those of other class members,” says Laura.

“To say those interactions are typical to thousands of other persons would be tough to swallow. I don’t think you can assume those multiple, separate interactions to have been similar.”

Written by Elizabeth Ecker

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  • Ms. Ecker —
    The 95-percent Rule in question is a term of the HECM mortgage contract, not a function of any recent “guidance” from HUD.
    Thanks,
    Atare

    • Atare,

      You are absolutely right.

      Being a little late to this thread it probably got corrected but I do not see where Ms. Ecker wrote that the 95% FMV contractual issue in question is a function of HUD guidance.

      • Yes, I made an adjustment to correct the language. Should be up to date now. Thanks.

      • Ms. Ecker,
         
        Thank you for your timely responses. 
         
        At least I know Atare was not reading into things or I need a remedial reading course (well the latter could be true anyway).
         
        You do a great job.  Keep up the good work.

      • Ms. Ecker,
         
        Thank you for your timely responses. 
         
        At least I know Atare was not reading into things or I need a remedial reading course (well the latter could be true anyway).
         
        You do a great job.  Keep up the good work.

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