AARP Sues HUD Over Change in Reverse Mortgage Rule

Posted on March 9, 2011

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Before 2008, HUD had a rule in place that protected a surviving spouse from foreclosure and eviction. That rule was that the homeowner could never owe more than the house was worth.

Today, with that rule gone, a spouse can die and there will be more debt than the house is worth. Then, getting a mortgage to stay in the property will be impossible and the elderly surviving spouse will be thrown out of the home. The practice means that a disinterested third party buyer will be able to purchase the family home for less than the surviving spouse would be able to do.

“Another protection in the Home Equity Conversion Mortgage (HECM) program is called “Safeguard to Prevent Displacement of Homeowner,” and says that HECM homeowners can’t be displaced from their homes until the loan terminates, adding “for purposes of this subsection, the term ‘homeowner’ includes the spouse of a homeowner,” according to AARP. HUD has never recognized this protection, the lawsuit states.”

See the full article at MarketWatch.

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