Reverse mortgage servicers face lawsuit over borrower 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."

A 70-page nationwide class-action lawsuit alleges that HECM servicers systematically added prohibited attorneys' fees, property inspection fees, property preservation fees and appraisal fees to reverse mortgage loan balances. The complaint names seven plaintiffs from New York, Pennsylvania, Florida and California and claims defendants added fees even when properties were occupied and foreclosure prerequisites were unmet, often at the initiation of foreclosure. The complaint asserts those disputed fees inflated principal balances, producing higher interest charges and mortgage insurance premiums that depleted home equity and increased the risk older homeowners could lose their homes. In some cases charges exceeded HUD limits by thousands of dollars.

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