AARP sues over reverse mortgage change

March 09, 2011 10:15AM

AARP, a seniors’ organization formerly known as the American Association of Retired Persons, has filed suit against the U.S. Department of Housing and Urban Development, alleging that the federal agency’s policy changes on reverse mortgages have led many older homeowners into foreclosure, according to the New York Times. Reverse mortgages, available to individuals 62 years or older, allow homeowners to borrow against the equity of their homes and defer repayment until the loan holder dies. But while reverse mortgages have been popular among elderly property owners, the AARP suit claims that changes made to the program in 2008 are a significant detriment to loan holders. Under the altered program, a surviving spouse of a reverse mortgage holder who isn’t named in the loan document is on the hook to pay off the loan in order to keep his or her own home. Jean Constantine-Davis, a lawyer with AARP, said this is unfair to hundreds of thousands of elderly residents, whose spouses signed up for mortgages under a different set of terms. “HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people,” Constantine-Davis said. [NYT]