ATLANTA (CN) – An 85-year-old whose late husband took out a reverse mortgage on their home claims in a federal complaint that the U.S. Department of Housing and Urban Development is trying to evict her.
Filed Friday by attorneys by the Atlanta Legal Aid Society, the complaint notes that Peggy Spaulding and her husband of 57 years bought their home in Stone Mountain, Georgia, together in 1980, but she was not a party to the reverse-mortgage loan agreement that Henry took out on March 30, 2009.
“As part of the loan transaction, Mr. Spaulding, UFG [Urban Financial Group], and HUD entered into a Home Equity Conversion Loan Agreement and contract for HECM insurance,” the complaint states.
Spaulding noted that she signed as a borrower on the first security deed to UFG and the second security deed to HUD, but “because the loan was originated prior to August 4, 2014, HUD’s standard form security deed at that time failed to provide any deferral period or other protection against foreclosure for Mrs. Spaulding.”
One year before Henry’s death on Jan. 12, 2014, according to the complaint, Reverse Mortgage Solutions Inc. bought the rights to the Spaulding loan.
Spaulding notes that she “was automatically vested with title upon her husband’s death under Georgia law of intestacy, and had the legal right to remain in her home for her lifetime.”
Nevertheless on March 3, 2014, she received a notice from RMS “declaring the entire loan balance of approximately $192,681.42 due and payable in full,” according to the complaint.
Spaulding says RMS would have changed the locks on her on March 11, but for the fact that she happened to be home “and was able to intervene before the lockout could be completed.”
“However, this conduct caused Mrs. Spaulding significant distress and fear of being put out of her home without notice,” the complaint states.
Spaulding says RMS notified her a year later that she appeared to be a candidate for assignment of what is known as MOE, or Mortgagee Optional Election, “which purportedly allows the mortgagee to assign the loan to HUD, so that HUD can allow the spouse to continue living in the home for his or her lifetime.”
According to the complaint, however, the agency arbitrarily rejected her MOE assignment.
Spaulding claims that she is one of many facing wrongful foreclosure and that she has no recourse because of HUD’s “imposition of additional requirements and capricious deadlines.”
While her attorneys did did not respond to a request for comment, HUD spokesman Brian Sullivan said he could only comment generally without knowing the specifics of Spaulding’s case.
In a phone call, Sullivan noted that the agency changed its policy following a lawsuit by AARP, “We created an option to let non-borrowing spouses to remain in the home even though the borrowed died,” he said.
As for Spaulding, however, Sullivan said that, “for whatever reason, she was not part of this mortgage.”
“It appears she’s a so-called non-borrowing spouse,” Sullivan added. “She’s technically not a party to the mortgage. So when the borrower dies, like any reverse mortgage, it ends.”