A new class-action lawsuit is putting renewed scrutiny on the reverse mortgage servicing industry, alleging that several large companies unlawfully charged older homeowners fees that federal rules explicitly prohibit.
The case, filed in the US District Court for the Eastern District of New York, claims the practices inflated loan balances and stripped seniors of home equity meant to support them later in life.
The lawsuit was brought by AARP Foundation attorneys alongside Tusa P.C. and Giskan, Solotaroff & Anderson, LLP. It names Compu-Link Corporation (doing business as Celink), Finance of America Reverse, LLC, and Carrington Mortgage Services, Inc. as defendants, with a related action seeking to add Longbridge Financial, LLC.
InvestmentNews has contacted each of the companies for comment. None of the allegations have been proven in court and defendants are presumed innocent until found guilty.
Finance of America told InvestmentNews:
“As an industry leader in reverse mortgages, Finance of America is dedicated to helping seniors unlock their home equity to age in place gracefully. Our industry is highly regulated, and we work diligently to ensure our compliance with all applicable laws and HUD guidance with respect to our HECM program. 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. We believe the claims to be without merit, and intend to defend ourselves vigorously."
Longbridge Financial's head of public relations, Trevor Chapman told InvestmentNews:
"Longbridge Financial only recently became aware of this motion and is reviewing it in detail. Based on information currently available, the motion seeks to add Longbridge Financial to a lawsuit challenging servicing practices that predate our involvement with the loan at issue. Longbridge Financial denies the allegations and believes they are without merit as they relate to our conduct. Longbridge Financial remains committed to responsible lending and servicing and to full compliance with all applicable laws and regulations.
The complaint alleges that the servicers routinely assessed four categories of fees that are barred under Home Equity Conversion Mortgage rules and loan agreements: attorneys’ fees, property inspection fees, property preservation charges, and appraisal costs. Plaintiffs argue that these charges, sometimes totaling tens of thousands of dollars per borrower, were improperly added to loan balances, compounding interest and mortgage insurance premiums and accelerating the erosion of equity.
The case includes plaintiffs from New York, Pennsylvania, Florida, and California, representing a proposed nationwide class of reverse mortgage borrowers or their estates. All plaintiffs took out federally insured HECMs, a program overseen by the U.S. Department of Housing and Urban Development and designed to allow homeowners age 62 and older to access equity without monthly mortgage payments.
“Reverse mortgages are meant to help older adults stay in their homes, not drain the very equity they’re counting on,” said William Alvarado Rivera, Senior Vice President of Litigation for AARP Foundation. “When companies pad these loans with illegal fees, they deplete the homeowner’s hard-earned assets and, in many cases, put them at risk of losing their homes. Enforcing these laws is essential to protecting older homeowners’ financial security.”
The lawsuit highlights individual cases where borrowers were charged amounts far beyond HUD limits, including examples in which attorneys’ fees exceeded $14,000 and $17,000, despite a regulatory cap of $725 for foreclosure attorneys’ fees in New York.
Plaintiffs also allege that some fees were imposed during foreclosure proceedings without proper notice or a meaningful opportunity for borrowers to resolve issues such as unpaid taxes or insurance. The complaint argues that these actions violated federal consumer protections and intensified financial harm by increasing overall loan balances.
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