The lawsuit alleges a systematic practice of unfairly charging reverse mortgage borrowers attorneys’ fees, appraisal fees, property maintenance 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, executor of Maria Graham’s estate; and a nationwide classification of homeowners in the same area. The plaintiffs are said to be from New York, Pennsylvania, Florida and California.
According to the complaint, each of the plaintiffs received a Home Equity Conversion Mortgage (HECM). The defendants are alleged to have added prohibited fees to borrowers’ loan balances in violation of federal laws and established HECM contracts that strictly limit such charges.
Plaintiffs allege that defendants charged fees even when properties were occupied and foreclosure requirements had not been met, adding fees to loan balances when they began the foreclosure process on HECM loans.
The complaint said the disputed funds inflate large balances, leading to higher interest costs and mortgage insurance premiums (MIPs) that erode borrowers’ home equity. This increases the risk that elderly homeowners could lose their homes, especially when workers fail to comply with required state protections, they said.
“Because the principal of the loans was increased by the Disputed Funds, the interest and MIP added to the class members’ loans increased,” the lawsuit reads.
In some cases, borrowers were charged rates that far exceeded the limits set by the US Department of Housing and Urban Development (HUD).
The lawsuit alleges that Rizzati was charged more than $14,000 in attorneys’ fees, while another plaintiff was charged $17,000, despite HUD’s New York attorneys’ fee limit of $725. The complaint estimates that tens of thousands of HECM borrowers across the country may have been charged the same amount since 2012.
By charging the disputed fees, the defendants allegedly violated federal law, the HECM contract, and state laws prohibiting unfair and deceptive practices.
“A reverse mortgage is designed to help seniors stay in their homes, not depleting the equity they depend on,” said William Alvarado Rivera, senior vice president of litigation for the AARP Foundation, in a statement.
“When companies charge off these loans illegally, they wipe out the homeowner’s hard-earned assets and, in many cases, put them at risk of losing their homes.
Spokespeople for Carrington Mortgage Services, Finance of America and Longbridge Financial did not immediately respond to requests for comment HousingWire‘s Reverse Mortgage Daily. A Celink spokesperson said the company does not comment on pending cases.
The plaintiffs are seeking a refund or reversal of payments by Celink on behalf of Carrington, Finance of America, Longbridge and other entities.
