Skip to content

Federal Court Rules Surviving Spouses Must be Protected

Represented by AARP Foundation Litigation attorneys, surviving spouses of reverse mortgage holders won a round in court and were awarded nearly $240,000 in attorneys’ fees.


Reverse mortgages — where a homeowner receives money for a home’s equity, each month incurring a slightly greater debt to be repaid when the home is sold — can sometimes help older people on fixed incomes. Available to those over age 62, the loans are regulated by the U.S. Department of Housing and Urban Development (HUD).

The amount of equity that can be drawn from a reverse mortgage is a function of the value of the property and the age of the youngest borrower: the older the borrower, the higher the loan. Evidence has been mounting that couples considering reverse mortgages are often persuaded to take the younger spouse off the deed. They report that mortgage brokers (whose fees are based on loan amount) assured them that this would be financially beneficial and could later be undone. What the couples do not understand is that the lender can call the mortgage due and foreclose after the death of the borrower. As a result, surviving spouses of reverse mortgage borrowers are faced with foreclosure once the borrowing spouse dies.

The federal reverse mortgage statute says this should not happen: It states that the mortgages may not be called due and payable until both spouses have died or the home is sold. But HUD, however, did not recognize this protection and allowed the mortgage to be called due when the borrower died.

Represented by AARP Foundation Litigation attorneys along with attorneys at Mehri & Skalet, PLLC, three surviving spouses sued HUD challenging its policy.  HUD initially persuaded a district court to dismiss plaintiffs’ case because, the court held, even if HUD’ changed its illegal practice, this would not relieve plaintiffs’ injury — the foreclosures on their homes — because the decision to foreclose was not up to HUD but the lenders holding the mortgages.

Plaintiffs appealed successfully. The appeals court found plaintiffs’ claims were redressable and, in commenting on the merits, observed, “We admit to being somewhat puzzled as to how HUD can justify a regulation that seems contrary to the governing statute.”

The case was then remanded to the district court.  After cross motions for summary judgment, the court found for plaintiffs.  It held that, if there is a surviving spouse living in the home, the regulation calling the mortgage due and payable upon the borrowing spouse’s death is illegal because it is directly contrary to the federal law congress passed. It then remanded the case to HUD to determine appropriate relief for plaintiffs. The court set for later a decision on attorneys’ fees, which were ultimately awarded to plaintiffs in the amount of $236,112.89.

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. Older people who thought they were planning ahead and signed up for reverse mortgages based on assurances from loan brokers, who then lost a spouse, are being hit with a third blow as they find the homes they had carefully planned to protect are in jeopardy.

Case Status

Bennett v. Donovan was decided by the U.S. Court of Appeals for the District of Columbia Circuit, and was remanded to the U.S. District Court for the District of Columbia.