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Chandler v. Wells Fargo

AARP Represents Homeowners Suing Over Failure to Abide by Reverse Mortgage

    

AARP Foundation Litigation attorneys and the attorneys from the private law firms of Kerr & Wagstaffe, LLP, and Mehri & Skalet, PLLC, are representing homeowners challenging both Wells Fargo Bank and the Federal National Mortgage Association (“Fannie Mae”) for failing to abide by the terms of their own contracts.

Background

Reverse mortgages — in which a homeowner receives money for a home’s equity, each month incurring a slightly greater debt to be repaid when the home is sold — may in some circumstances be helpful to older people on fixed incomes, who often don’t qualify for other foreclosure prevention programs. Fannie Mae owned and Wells Fargo sold and serviced reverse mortgages. The lawsuit alleges that under the terms of the reverse mortgages at issue, once the mortgage becomes due, the borrower (or the borrower’s estate or heirs, after the borrower died) could sell or transfer the reverse-mortgaged property for 95 percent of the appraised value — notwithstanding the mortgage balance.

This 95 percent rule prevented families and survivors from losing their homes in the event of a downturn in the real estate market. Lenders were protected because participants were required to purchase loan insurance.

However, survivors and families of deceased borrowers allege that Fannie Mae and Wells Fargo refuse to abide by the 95 percent rule and instead demand repayment of the full mortgage balance. When they do not receive it, survivors argue, the lenders foreclose on the properties and evict the survivors.

Named plaintiff Robert Chandler is the heir of his mother, Rosemary Chandler, who obtained a reverse mortgage in 2005 on the home the family owned and lived in since the 1940s. Soon after she passed away in 2010, he argues, Wells Fargo initiated foreclosure proceedings never having informed him of the 95 percent rule and insisting he pay off the full mortgage balance if he wished to keep the house.

Earlier this year, the U.S. Department of Housing and Urban Development (HUD) reversed a policy that had led to evictions of reverse mortgage holders’ surviving spouses, a reversal spurred at least in part by a lawsuit filed by attorneys with AARP Foundation Litigation. "In the wake of HUD’s reversal of its rule on the rights of surviving spouses and heirs earlier this year … It is difficult to understand why reverse mortgage lenders continue to deny them their contractual and legal rights,” AARP Foundation Litigation attorney Jean Constantine-Davis told the National Mortgage Professional magazine.

What’s at Stake

Nearly one quarter of all mortgaged homes are underwater today, a particular blow to people with limited resources and fixed incomes. The families of older people who thought they were planning ahead and signed up for reverse mortgages before they died are being hit with another blow as they find their homes in jeopardy.

Case Status

The class action lawsuit Chandler v. Wells Fargo is before the U.S. District Court for the Northern District of California.


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Our legal advocacy initiatives  - conducted by AARP Foundation Litigation (AFL) - reflect more than 15 years of work in federal and state courts across the country. Through our efforts, we support the Foundation’s four priority areas: Hunger, Income, Housing and Isolation, and ensure that those 50 and older have a voice in the laws and policies that affect their daily lives.