The AARP is challenging reverse mortgage foreclosures conducted by Fannie Mae and Wells Fargo, claiming that these lenders did not hold up their end of the bargain with senior homeowners before foreclosing. Part of the terms of a reverse mortgage require that borrowers – and often borrowers’ spouses and heirs – be permitted to purchase the property after the mortgagee’s death for a discount. In many cases, this discount could amount to knocking 5 percent off market value, which in today’s market puts lenders at a huge loss. As a result, Fannie Mae and Wells Fargo are, allegedly, not making this option available, and AARP is having none of it.
For a period of time between 2008 and 2011, the department of Housing and Urban Development (HUD) ruled that the heirs to the home needed to pay the remaining balance on the mortgage if they wanted to keep the property, regardless of how much the home was worth. However, in July of this year HUD reversed its decision and reverted to “the fairer practice of not requiring payment that exceeded the updated value of the home.” However, according to AARP, the two lenders in questions are failing to give notice to surviving spouses and heirs about the “rights to purchase the property for the lower value.” Instead, they are foreclosing and evicting the spouse and/or heirs.
Do you think it is fair that the lenders should take the loss on these mortgages since the homes have fallen so far in value? What do you think about the HUD reversal?
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