A new class action lawsuit claims Carrington Mortgage Services, Celink and Finance of America Reverse have squeezed thousands of dollars of illegal fees out of tens of thousands of older homeowners.
Representatives for reverse mortgage borrowers say the homeowners were overcharged for a variety of fees and suffered inflated interest and mortgage insurance premium costs. Attorneys for AARP were among the counsel who filed the lawsuit earlier this month in a New York federal court. The claim is similar to other longstanding litigation against reverse mortgage players.
The complaint paints much of the blame
AARP in a press release Thursday emphasized the sensitive nature of the equity the older homeowners rely on. Seniors hold
The lead plaintiff in the case, representing her mother's estate, claims she was charged over $14,000 in disputed attorney fees since 2022, and was subject to a 0.5% MIP hike on her Home Equity Conversion Mortgage. Four other named plaintiffs allege losing four-figure sums to a variety of bogus charges.
"When companies pad these loans with illegal fees, they deplete the homeowners' hard-earned assets and, in many cases, put them at risk of losing their homes," said William Alvarado Rivera, senior vice president of litigation for the AARP Foundation, in a press release.
While a representative for Celink didn't return a request for comment, a spokesperson for Carrington declined to comment Friday. A spokesperson for Finance of America defended the company and said the claims are without merit.
"We are disappointed that the AARP has chosen litigation, as we believe that dialogue and constructive engagement are the best way to ensure that this important program remains accessible and beneficial for the older homeowners it is designed to serve," the spokesperson said in an email.
How reverse mortgage servicers allegedly overcharged borrowers
The lawsuit claims the servicers profited off reverse mortgage balances inflated by four specific types of charges. Those are:
- Attorney's fees;
- Property inspection fees;
- Property preservation fees;
- Appraisals
Many of the expenses, particularly appraisal and property fees, were charged at times during the lifecycle of the loan when the mortgage contract didn't permit, attorneys said. That includes excessive billing, as one plaintiff was assessed 20 inspection and preservation fees while she occupied her home. The servicers also allegedly failed to follow required foreclosure protocol, failing to deliver required notices and subsequently charging borrowers attorneys' fees beyond what the Department of Housing and Urban Development's HECM rules permit.
The lawsuit places much of the blame on Celink, although it argues the larger players are liable for not adequately supervising, or correcting the subservicer's violations. Plaintiffs accuse the firms of unjust enrichment, violations of HECM agreements and of multiple state consumer protection laws.
"The master servicer defendants turn a blind eye to Celink's systemic subservicing violations that breach standardized HECM loan agreements and violate federal and state HECM mortgagors protection statutes and regulations," the suit said.
The new case follows 2018 accusations
