The Department of Housing and Urban Development has a birthday gift for widow Jeanette Ogle — a gift that should cause any senior to think twice before signing up for a government-insured reverse mortgage.
Later this month, on Ogle’s 92nd birthday, her home in Lake Havasu City, Ariz., is scheduled for foreclosure — and it’s not because she did something wrong. Instead, she is expected to lose her house because only her late husband’s name was included on the reverse mortgage documents prepared by a loan broker in 2007. This was despite the fact that both her and her husband’s names were clearly listed as co-borrowers in the documents for the mortgage that was being refinanced, Ogle says, and the couple wanted no change in that status.
But under a controversial policy that is drawing national scrutiny and at least one major lawsuit, HUD, which administers the reverse mortgage program, insists that when a spouse dies and the surviving spouse’s name is not on the loan documents, the full mortgage balance becomes due and payable. If the surviving spouse or a relative cannot purchase the house and pay off the debt, the loan may be subject to a foreclosure sale.
Ogle, whose husband, John, died in 2010, says she cannot imagine why she is facing foreclosure. “We did everything we were supposed to do,” she says. “I signed every piece of paper; we followed the rules.” The couple assumed that the loan they initially took out in 2004 would allow them to do what advertisements for reverse mortgages consistently promise: stay in their home indefinitely, with some extra money for living expenses.
But it’s not turning out that way.
“I just don’t understand why they are doing this to me,” she said in an interview. “I don’t want to lose my home.”
HUD’s reverse mortgage program, in which loans by private lenders are insured by the Federal Housing Administration (FHA), has been big business. Promoted on TV by pitchmen such as Hollywood’s Robert Wagner and former Sen. Fred Thompson, there were 582,000 loans outstanding nationwide as of November 2011, according to the Consumer Financial Protection Bureau, which issued a critical evaluation of the program last year.
Reverse mortgages are restricted to people age 62 or older. The program allows homeowners to tap into their equity and pull out money for use in their retirement years. As long as they pay their property taxes and hazard insurance, generally they don’t have to repay any of the money until they move out, die or sell the house.
HUD’s policy on surviving spouses has been challenged in a federal lawsuit filed by AARP, the seniors advocacy group. On behalf of two widows and one widower — Ogle was not a plaintiff — who were threatened with foreclosure, AARP charged that HUD disregarded clear statutory language that allows surviving spouses to remain in their homes even if their names are not on the documents. In a ruling last month, Judge Laurence H. Silberman of the U.S. Court of Appeals said that the court was “somewhat puzzled as to how HUD can justify a regulation that seems contrary to the governing statute.”
HUD had no comment on that ruling, which sent the case back to a lower court, and refused to discuss Jeanette Ogle’s pending foreclosure. So did Ogle’s loan servicer, Reverse Mortgage Solutions of Spring, Tex., which initiated the foreclosure action. Fannie Mae, the federally regulated mortgage investor that owns Ogle’s loan, said that the foreclosure would have to proceed because the mortgage is insured by FHA and that the agency’s rules effectively require it, given the absence of Ogle’s name on the documents.
Andrew Wilson, a Fannie Mae spokesman, says the company has a document purportedly signed by the Ogles acknowledging that their refinanced mortgage lists only John Ogle as the borrower. Jeanette Ogle says she has no recollection of signing anything of the sort. “Why would we?” she asked in an interview. Wilson says that whatever the facts, Fannie Mae is “sympathetic” toward Ogle’s plight and will seek to delay any post-foreclosure eviction.
Jean Constantine-Davis, AARP’s senior attorney on the lawsuit, called Ogle’s circumstances “pretty horrible” and said HUD’s “current regulation has been devastating on surviving spouses.” AARP’s suit alleged that there are “hundreds” of elderly victims of the policy.
Ogle’s son, Robert, has asked the Arizona state attorney general’s office to intervene and investigate how his mother’s name was left off the mortgage. But in the meantime, the clock is ticking toward Jeanette Ogle’s foreclosure. And her 92nd birthday.
Ken Harney’s e-mail address is firstname.lastname@example.org.