Archive for May, 2011

Failure to Protect: The Case against HUD, part 1

Sunday, May 15th, 2011

The Non-borrowing Spouse and Reverse Mortgages


Harlan Moore must be turning in his grave. He died in 2008 believing that, upon his death, his wife and only heir, Delores, will be protected from displacement from their marital home in Covington, Indiana.

The assurance he got when he and his wife received counseling for a government-insured reverse mortgage in September 2005 seemed iron-clad: It came from the informed lips of a HUD-approved reverse mortgage counselor, who repeated a bed-rock program policy: Delores Moore could keep the home by paying off the loan balance but would never owe more than the fair market value of the property.

But 16 months after Harlan was buried, Delores Moore, 79, faced foreclosure and eviction from her marital home. Leila Joseph, 77, of Brooklyn, New York and Robert Bennett, 69, of Anapolis, Maryland (widow and widower of HECM borrowers Albert Joseph and Ophelia Bennett) met similar fates.

The widower and two widows are the plaintiffs in a seminal case for America’s seniors and the U.S. reverse mortgage industry now before the U. S. District Court for The District of Columbia. Filed March 8th, 2011 by AARP Foundation Litigation and the Washington, D C Law firm of Mehri & Skalet on behalf of the bereaved HECM spouses, the so-called “AARP Lawsuit” can be summed up in three words: Failure to protect.

What caused the ‘AARP lawsuit’? How did a federal government agency, authorized by Federal law to protect non-borrowing spouses in HECM transactions, end up accused of failing to provide that protection? How will the case’s outcome affect seniors, HUD, and the reverse mortgage industry? Why is the case important? Without statutory anti-displacement protection provision for non-borrowing spouse in a reverse mortgage contract, can the contract be legally valid? These are some of the questions we will look at in the series.*

For this series, I have three goals: to explain the lawsuit; to advance the idea that protection for non-borrowing spouses is good for the industry, and to suggest some ideas for protecting non-borrowing spouses.

*The series continue in July upon my return from Africa.

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