The suit alleges a systemic practice of improperly charging reverse mortgage borrowers for attorneys’ fees, property inspection fees, property preservation fees and appraisal fees.
The 70-page lawsuit was filed on behalf of Molly-Jeanne Rizzati, administrator of the estate of her mother, Kristine; Tamara Simpson, personal representative of the estate of Judith Forseth; Ellisa Martin, power of attorney for Dathel Balch; Deloris Whitaker, executor of the estate of Rufus Whitaker; Michael Hawkins, administrator of the estate of Maria Graham; and a nationwide class of similarly situated homeowners. The named plaintiffs are from New York, Pennsylvania, Florida and California.
According to the complaint, each of the plaintiffs obtained a Home Equity Conversion Mortgage (HECM). The defendants allegedly added the prohibited fees to borrowers’ loan balances in violation of federal regulations and standardized HECM contracts that strictly limit such charges.
The plaintiffs allege the defendants imposed the fees even when properties were occupied and foreclosure-related requirements had not been met, adding the fees to loan balances when initiating foreclosure proceedings on HECM loans.
The complaint said the disputed fees inflated principal balances, resulting in higher interest charges and mortgage insurance premiums (MIPs) that depleted borrowers’ home equity. This increased the risk that older homeowners could lose their homes, particularly when servicers failed to comply with required federal protections, they allege.
“Because the loan principal was inflated by the Disputed Fees, the interest and MIP added to Class members’ loans was overstated,” the suit reads.
In some cases, borrowers were charged amounts far exceeding limits set by the U.S. Department of Housing and Urban Development (HUD).
The suit claims that Rizzati was charged more than $14,000 in attorneys’ fees, while another plaintiff was charged $17,000, despite HUD limits that cap New York foreclosure attorneys’ fees at $725. The complaint estimates that tens of thousands of HECM borrowers nationwide may have been charged similar fees since 2012.
By charging the disputed fees, the defendants allegedly violated federal law, the HECM contract, and state laws prohibiting unfair and deceptive practices.
“Reverse mortgages are meant to help older adults stay in their homes, not drain the very equity they’re counting on,” William Alvarado Rivera, senior vice president of litigation for AARP Foundation, said in a statement.
“When companies pad these loans with illegal fees, they deplete the homeowner’s hard-earned assets and, in many cases, put them at risk of losing their homes. Enforcing these laws is essential to protecting older homeowners’ financial security.”
A spokesperson for Finance of America issued a statement to HousingWire‘s Reverse Mortgage Daily in which the company said it would “defend itself vigorously” and “believe the claims to be without merit.”
“As an industry leader in reverse mortgages, Finance of America is dedicated to helping seniors unlock their home equity to age in place gracefully. Our industry is highly regulated, and we work diligently to ensure our compliance with all applicable laws and HUD guidance with respect to our HECM program,” the statement read.
“We are disappointed that the AARP has chosen litigation, as we believe that dialogue and constructive engagement are the best way to ensure that this important program remains accessible and beneficial for the older homeowners it is designed to serve.”
Longbridge Financial also issued a statement through a spokesperson, who said the company only recently became aware of the motion and is reviewing it in detail.
“Based on information currently available, the motion seeks to add Longbridge Financial to a lawsuit challenging servicing practices that predate our involvement with the loan at issue,” the statement reads. “Longbridge Financial denies the allegations and believes they are without merit as they relate to our conduct. Longbridge Financial remains committed to responsible lending and servicing and to full compliance with all applicable laws and regulations.”
Representatives for Celink and Carrington Mortgage Services said their companies do not comment on pending litigation.
The plaintiffs are seeking reimbursement or reversal of fees by Celink on behalf of Carrington, Finance of America, Longbridge and other entities.
Editor’s note: This story has been updated with statements from Carrington Mortgage Services, Celink, Finance of America and Longbridge Financial.
