HUD Appeals Non-Borrowing Reverse Mortgage Spouse Ruling

The Department of Housing and Urban Development (HUD) has appealed a recent court decision regarding reverse mortgage non-borrowing spouses.

HUD Secretary Shaun Donovan has filed a notice of appeal in the reverse mortgage lawsuit after a court ruled in October in favor of two non-borrowing spouses.

The Department of Justice filed the appeal on behalf of Secretary Donovan on November 26, 2013 regarding the case Bennet v. Donovan. The notice of appeal was submitted by Assistant Attorney General Stuart F. Delery.

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In October, a court in Washington, D.C. ruled against HUD in the lawsuit, claiming that the government agency violated federal law when it did not protect the surviving, non-borrowing spouses of reverse mortgage borrowers in the plaintiffs’ cases.

Robert Bennett of Annapolis, Maryland and Leila Joseph of Brooklyn, New York, filed the suit against HUD after the agency had foreclosed on their homes they shared with their late spouses. Since their spouses had been reverse mortgage borrowers, Bennet and Joseph had their names taken off the titles of their homes.

AARP, which represented Bennet and Joseph, argued that foreclosure action was illegal as certain HUD regulations and mortgage documents conflicted with a law passed by Congress that authorized the agency’s Home Equity Conversion Mortgage program. The organization welcomed the October court decision, stating it was hopeful HUD would “act quickly” to implement new borrower protections as a result.

Written by Jason Oliva

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  • The law is clear. It does not require HUD to protect anyone. The law mandates that FHA/HUD may not insure any HECM which does not have a provision which does not allow the displacement of the homeowner (which includes the spouse without qualification for being a co-borrower) due to a number of conditions including the homeowner passes away. Here is what the law literally says:

    “(j) Safeguard to prevent displacement of homeowner

    The Secretary may not insure a home equity conversion mortgage under this section unless such mortgage provides that the homeowner’s obligation to satisfy the loan obligation is deferred until the homeowner’s death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary. For purposes of this subsection, the term “homeowner” includes the spouse of a homeowner. Section 1647(b) of title 15 and any implementing regulations issued by the Board of Governors of the Federal Reserve System shall not apply to a mortgage insured under this section.”

    Either the author of the story (or the source he relies on) did not summarize the case properly or the lower court was flat out wrong unless both loans were in assignment so that FHA/HUD was the actual owner of the related note at the time that the HECM matured. But the case should be about FHA insuring HECMs which do not have the required provision.

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