California Real Estate Fraud Report

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AARP Sues Wells Fargo, Fannie Mae over Reverse Mortgages

AARP, formerly called the American Association of Retired Persons, has filed a class action lawsuit against Wells Fargo Bank and Fannie Mae, accusing both of prohibiting the surviving spouses and heirs of people who had taken out reverse mortgages from purchasing the homes for the appraised values after the owner died.

AARP’s attorneys battled and won a reversal several months ago from the U.S. Department of Housing and Urban Development (HUD), which regulates and insures reverse mortgages.  The common reverse mortgage known as the Home Equity Conversion Mortgage (HECM), was created to prevent foreclosures by guaranteeing that the borrower can never owe more than the property is worth.

The two rules on which HUD reversed itself are (1) previously forbidding arms-length sales (in this case, to surviving spouses or relatives) for 95% of the current appraised value of the homes, and (2) when the borrower dies, the surviving spouse must repay the full balance of the loan, even if the home is worth less.

Wells Fargo is being sued for allegedly continuing to foreclose on properties with reverse mortgages after HUD backed down on the two rules. The plaintiff suing Wells Fargo in the class action suit is Robert Chandler, of Elk Grove, California.

Read the original article in Reuters.

© Copyright 2007-2018 Monique Bryher

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