Wells Fargo Faces Lawsuit Over Reverse Mortgage Policies
Wells Fargo & Company is allegedly forcing homes into foreclosure instead of giving heirs an opportunity to purchase them, in violation of federal rules on reverse mortgages, according to a Bloomberg release. According to the allegations, estates and surviving spouses have the right to buy the property at 95% of the appraised value, after the death of the borrower who had taken out a federally insured reverse mortgage.
Reverse mortgages are provided to older homeowners over the age of 62, which allows them to borrow from the equity that they have in the home, usually in monthly installments for living expenses. Then, when the borrower passes away or sells and moves, the amount borrowed is repaid. Generally, borrowers are required to keep the insurance and taxes paid up to date in order to keep from being in arrears.
According to the lawsuit, Wells Fargo has not been notifying the heirs of borrowers that they have a right to purchase the property and have been proceeding to foreclose if the full mortgage balance is not paid on demand. The lawsuit is brought as a class action by the Plaintiff, Robert Chandler, on behalf of himself and other heirs asking for a Court Order stopping the foreclosures and evictions in affected homes and for compensatory damages for breach of contract. Chandler has also sued Fannie Mae, or the Federal National Mortgage Association.
Counsel for the plaintiff stated that “Wells Fargo’s actions are not just wrong, they are economically irrational. Even though the elderly borrowers paid for insurance that protects the bank against the downturn in the housing market, Wells Fargo insists on evicting family members from the homes that will go unsold and unoccupied.”