HECM Non-Borrowing Spouses Renew Class Certification Attempts










Plaintiffs advocating for spousal rights in existing Home Equity Conversion Mortgages are renewing their motion for class certification, citing circumstances surrounding two instances of foreclosures under interim government policy.

Two widows who were not named in reverse mortgages obtained by their husbands had hoped new interim government rules would let them keep their homes after their spouses died, but so far they haven’t, according to a Nov. 7 filing with the U.S. District Court in Washington, D.C.

At least one is a longstanding plaintiff in related litigation. The women have received notice that they will face foreclosure during the first week of December, according to the filing by the Washington, D.C.-based AARP Foundation and law firm Mehri Skalet PLLC.

OneWest Bank is named as the entity foreclosing, and it has said it would stay the foreclosures if the Department of Housing and Urban Development would suspend curtailment of interest on the loans, according to court documents. OneWest directed a call about the matter to public relations firm Sard Verbinnen’s San Francisco office. Sard Verbinnen vice president David Isaacs said OneWest declined to comment.

HUD has been working on a new policy for existing “non-borrowing spouses” as a result of court decisions related to litigation, but it has not yet been finalized its that policy. It said under an interim policy it would temporarily delay such foreclosures and possibly allow these spouses to stay in the home indefinitely so long as they met certain criteria.

But the new motion suggests HUD threatens to curtail interest payments on loans it insures through the Federal Housing Administration when servicers miss foreclosure deadlines if it finds that its criteria have not been met. So far, there do not appear to be any documented instances of HUD giving any existing non-borrowing spouses long-term relief under its interim criteria.

“The motion made clear HUD is actually penalizing lenders for not foreclosing,” said Atare Agbamu, president and CEO of the advisory firm ThinkReverse LLC.

HUD did not return a call for comment and typically does not comment on litigation. While other court filings show HUD has been proposing various forms of relief for existing non-borrowing spouses, plaintiffs have been rejecting the offers as so restrictive that no consumer is likely to meet them. HUD earlier this year implemented a policy for new loans that protects spouses’ right to the home so long as they can meet certain conditions; key among them the ability to maintain their property tax and homeowner insurance payments.

But under the policy for new loans, HUD is able to better account for the risk that a younger surviving spouse could fall behind on taxes and insurance or stay in the home a long time than it can in existing loans by limiting the proceeds a borrower can receive from a new HECM origination to the risk profile of the younger spouse.

In the recent class certification motion, both plaintiffs are widows of existing HECM borrowers and claim they have remained current on their taxes and insurance payments.

One, Janice Cooper, is a 73-year-old federal government retiree in Southern California with severe heart disease. She also requires the assistance of a registered service dog. Her only income comes from Social Security and does not know where she will live if the foreclosure goes through, according to the court filing.

The other, Ernestine Harris, is a longstanding plaintiff in AARP Foundation litigation against HUD. She is 65 and legally blind, according to a declaration filed by her attorney, J. Rachel Scott. Scott is an attorney at the nonprofit Senior Citizens Law Project of the Atlanta Legal Aid Society Inc.

Previous attempts by plaintiffs to gain class certification for non-borrowing spouses have been unsuccessful. How many widows or widowers might be in the existing non-borrowing spouse category has yet to be quantified and whether two cases are sufficient grounds for a class certification where they can represent a larger group remains to be seen. A handful of spouses have been involved in long-running litigation, and at least one has faced a foreclosure attempt this year.

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