AARP: Resolution Needed for Reverse Mortgage Non-borrowing Spouses

AARP provided a more insight this week into a lawsuit filed by the organization on behalf of non-borrowing spouses of reverse mortgage borrowers. Through a blog post on AARP’s website, Drexel University Law Professor Lisa McElroy, who also comments in the press regularly on legal topics, recapped the issues brought forth by the suit. 

A previous related suit filed against the Department of Housing and Urban Development and won by two plaintiffs in late 2013 AARP was viewed as “great news,” McElroy writes. 

“Now, AARP Foundation Litigation has filed a class-action suit on behalf of all widowed homeowners who were harmed by HUD’s reverse mortgage policy — one that caused many of them hardship when mortgage lenders foreclosed on their homes,” she explains. 


Non-borrowing spouses whose names were either not on the home title to begin with or whose names were removed from the home title some time before the reverse mortgage closed, are facing undue harm, and all of those spouses should receive protection from HUD against foreclosure, AARP claims in its suit against HUD.

The suit could encompass a “multitude” of borrowers, McElroy writes, citing input from AARP Litigation Foundation attorney Jean Constantine-Davis who says it is likely that “thousands of widows and widowers are affected by this legal resolution.” 

The class action, AARP says, will help as many as possible.

HUD had not replied to a request for comment as of press time. 

Written by Elizabeth Ecker

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  • Unlike others who see assignment as the unique solution for HUD’s horrible policy on spousal displacement, this class action injuctive relief filing is absolutely necessary. Rather than passively waiting for HUD to take the HECMs related to surviving non-borrowing spouses (SNBSs) into assignment while seeing those homes foreclosed upon, SNBSs need the certainty of a home to live in.

    While some are against SNBSs, it behooves our industry to support the law. It is not that one is for or against HUD. HUD should support the law since it failed to have the law changed to support its very questionable position. To show HUD did not have the power to pick and choose which provisions to implement based on what is best for the HECM program, HUD officials asked Congress last year to GRANT such powers to the HUD Secretary, which Congress did. So would HUD need Congress to grant such powers if it already possessed them? Based on passage of that law, one can reasonable assume that before enactment last summer, HUD lacked such power.

    So now it is time for the HUD Secretary to provide a Mortgagee Letter or other qualifying notice stating what HUD policy on SNBS and displacement [12 USC 1715z-20(j)] will be from the date of implementation forward due to his determination of how the current harms the MMI Fund.

    Some wonder if HUD accumulated the over $8.2 billion from transfers from other MMI Fund programs and Treasury so it can absorb the costs of its incorrect position on its pre-2013 powers and the SNBS displacement issue. Based on the current HECM structure it is not clear if the current $6.5 billion capital reserve will be needed for any other purpose other than meeting the 2% Capital Reserve requirement.

    • All of the articles make it look like the NBS was taken advantage of. In reality, they chose not to be on title.. The paperwork and counseling are very clear on the consequences. The borrower’s chose to not have their name on the loan so that they could receive more money. In life everyone has consequences for their actions. There is no way that a NBS could not have known the consequences unless they were mentally ill or something. We all reap the consequences of our own personal choices. That is life. Good or Bad.

    • Atare,

      I know of no lender who does not want the displacement of the Surviving NBS problem resolved now. The unwilling party is HUD.

      As the Chief of Staffs say about the POTUS, it is time to speak to power. HUD holds all of the power to change the situation.

  • Ms. Hackman,

    Are you saying that HECM borrowers do not have the right to dispute how HUD and you interpret the law? Are you really that opinionated and intolerant? Do you really disrespect the rights and opinions of others that you believe your opinion should control their destiny.

    Have you read the law or the cases? Do you understand the issues? It seems you believe that these seniors, AARP, and people like me are simply complaining about these seniors losing homes. Or is the real problem that HUD is intentionally misinterpreting 12 USC 1715z-20(j) and leading people like you to do the same? Here is the law:

    “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.”

    So where does the law say that its prevention of displacement of homeowners (not borrowers) does not include SNBSs? When it comes to spouses, all the provision says is that “the term ‘homeowner’ includes the spouse of a homeowner.” I am no bleeding heart liberal but a hard core conservative who believes that even HUD should follow the law, not make up its own rules in defiance of it.

    The law does not say that the term homeowner ONLY includes borrowing spouses of the homeowner. That would be an unnecessary statement. Why refer to the spouse with no qualifiers unless it was the intention of the Congress that passed the law to include ALL types of spouses (borrowing or not) who are living in the home at what would otherwise be the normal time of displacement?

    Are you really that brainwashed to not at least acknowledge that the SNBSs have a reasoned position even if you disagree with is conclusion? They are not wrong for going to the courts to have this issue settled. Whether their opinion and my own are wrong, these seniors deserve their day in court. The courts seem to show that their impression of the law is that HUD has taken the wrong position and has steered lenders, counselors, and lenders (including originators like you) to provide incorrect information on the SNBS issue. It seems HUD has successfully made you its mouthpiece.

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