Attorneys from the AARP Foundation have joined a proposed class action lawsuit against Compu-Link (Celink) and Reverse Mortgage Funding (RMF), two prominent players in the reverse mortgage industry.
The lawsuit alleges that these companies added various types of unlawful loan servicing fees that violate reverse mortgage contracts, as well as federal and state laws designed to protect older homeowners. The case was filed in the Eastern District of New York by Tusa P.C. and Giskan, Solotaroff, & Anderson, LLP on behalf of plaintiffs Sheila Dancy-Wilkins and her 93-year-old mother, Flora Mayweathers, along with a nationwide class of similarly situated homeowners.
Reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs), provide a financial lifeline for older homeowners by allowing them to convert a portion of their home equity into cash without the need to sell their homes or make monthly mortgage payments. However, the lawsuit alleges that after RMF acquired the plaintiffs' loan and enlisted the services of Celink. Both companies imposed unlawful fees for appraisals, inspections, property preservation, and attorneys' fees or costs.
In court documents, attorneys for Celink said the case must be dismissed because Celink "merely subservices the loan on behalf of RMF." RMF is in bankruptcy and has not filed an appearance in the case to respond to the allegations.
Mayweathers failed to pay her property taxes in 2017, according to court documents. And that's when RMF commenced foreclosure proceedings.
One of the central claims of the lawsuit is that Celink and RMF failed to provide the required notices before initiating foreclosure proceedings. While the foreclosure was eventually dismissed, the allegedly unlawful fees had already been added to the plaintiffs' reverse mortgage loan balance. The complaint further asserts that the companies continue to charge excessive interest and fees on this wrongfully inflated loan balance every month.
“Older homeowners worked hard to pay their mortgages. When they borrow from their home equity so they can age in place, they deserve fair treatment and protection,” said William Alvarado Rivera, senior vice president of litigation for AARP Foundation. “Protecting the home equity of vulnerable older homeowners from deceptive and unfair practices is one of AARP Foundation’s strategic priorities.”
Federal and state laws and regulations mandate that servicers and subservicers of HECM loans such as Celink provide detailed written notices to borrowers before initiating a reverse mortgage foreclosure.
Celink argues that it's responsibilities are not the same as RMF, who it contracted with to subservice the loan. It says the two defendants should not be lumped together as part of the class.
Additionally, U.S. Department of Housing and Urban Development regulations prohibit the addition of specific foreclosure-related fees to borrowers' HECM loan balances, according to the complaint. These prohibited fees include unreasonable attorney and trustee fees, charges for appraisals conducted after loans are declared due and payable, and unnecessary inspection fees when the home is still occupied by the borrowers.
The plaintiffs in this case seek to put an end to the practice of reverse mortgage lenders and servicers adding unlawful and unreasonable fees and costs to the loan accounts of older homeowners. They also aim to remove the unlawful and inflated fees, interest, and insurance charges from the loan balances of borrowers whose loans were serviced by RMF or Celink. The lawsuit remains ongoing.
