AARP Sues HUD Over Reverse Mortgage Program Changes

U.S. senior advocacy group, AARP, sued the Department of Housing and Urban Development (HUD) on Tuesday over policy changes it believes make it easier for older Americans to lose their home to foreclosure. The group said the policy changes resulted in senior homeowners having to pay far more for FHA reverse mortgages than they were originally promised by the government agency.

Changes in 2008 Affecting Current Senior Homeowners

A key policy change centered around reverse mortgages (which allow homeowners over the age of 62 to collect monthly payments based on equity in their home instead of making monthly mortgage loan payments) was made by the Bush administration in late 2008 and is now leaving some senior homeowners in danger of losing their homes.

The reverse mortgages in question were backed by the Federal Housing Administration (FHA) and according to the terms of the Home Equity Conversion Mortgage (HECM) program that housed them, were not due on a home until it was sold, the homeowner moved out or the last remaining homeowner died.

Also, while the homeowner’s loan got larger over time, it could never exceed the value of the home for the borrower or the borrower’s heir.

But the 2008 policy change pulled back on the rules that had been in place since 1989, first allowing the loan to exceed the home’s value and then making an heir or surviving spouse not on the mortgage responsible for that balance if the homeowner died.

Lawsuit Pushes for Rights of Struggling Seniors

On Tuesday, the AARP Foundation, which is the charitable arm of AARP, sued HUD Secretary Shaun Donovan in federal district court on behalf of three homeowners in the age range of 69 to 79 facing foreclosure and eviction.

As told by Jean Constantine-Davis, a senior attorney at the AARP Foundation, ”HUD changed the rules in the middle of the game without following federal law” and even pulled back on another of its protections, which is that HECM homeowners (including the heir or spouse of the homeowner) can’t be displaced from their homes until the loan terminates.

AARP has expressed hope that HUD will reverse its decision on reverse mortgages and decide to allow the three homeowners in the lawsuit to remain in their homes, along with any other homeowners who could be affected.

Current and former HUD representatives have been contacted by various media outlets and, to date, have received no comment due to the pending litigation.