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Non-Profit Sues HUD Over Stalled Information Request on Reverse Mortgage Foreclosures

gavel-twoSan Francisco-based non-profit California Reinvestment Coalition (CRC) filed a lawsuit in federal court against HUD, claiming that the Department improperly denied a fee waiver for a Freedom of Information Act (FOIA) request, according to an announcement from CRC.

CRC submitted the FOIA request in November 2014 in order to obtain more information on HUD's overseeing of the reverse mortgage industry, the national impact of foreclosures on widowed non-borrowing spouses on reverse mortgages (many of whom are seniors), how HUD responds to these foreclosures, and the track record of OneWest Bank and its reverse mortgage subsidiary, Financial Freedom, according to CRC.

"We filed our FOIA request in 2014 after being contacted by affected widows and advocates in the context of our protest against the merger of OneWest Bank with CIT Group," said Kevin Stein, associate director at CRC. "We heard a number of troubling stories about widowed homeowners being foreclosed on by Financial Freedom. Given the national implications of this problem, we requested data from HUD on the number of people impacted and HUD’s process for designing a new policy. We also asked HUD for data on Financial Freedom foreclosures and complaints so that the public and bank regulators could better evaluate OneWest’s track record as part its merger application."

A spokesman from HUD said the Department's policy was not to comment on ongoing litigation.

"We heard a number of troubling stories about widowed homeowners being foreclosed on by Financial Freedom."

CRC requested the waiver for the FOIA fee based on the non-profit's belief that the request met the "public interest" requirement, given the number of seniors who could be affected by the problem. HUD denied the fee waiver request in December 2014 and also denied a subsequent appeal in March 2015, claiming that the request did not meet the Department's public interest requirements, according to CRC.

Many so-called "widow foreclosures" happened because some reverse mortgage originators named only the borrower on the reverse mortgage, which later allowed the servicers to foreclose on the non-borrowing spouse. Many of the non-borrowing spouses were unaware that servicers could legally foreclose on them and were not anticipating this. HUD, while overseeing the reverse mortgage industry, allowed these foreclosures until the department was sued and required by law to amend its reverse mortgage policies for non-borrowing spouses, according to CRC.

The FOIA request made by CRC is asking HUD for:

  • The number of foreclosures on reverse mortgages nationally since 2009 (including "widow foreclosures," or foreclosures on non-borrowing, surviving spouses)
  • The number of foreclosures on reverse mortgages by OneWest/Financial Freedom on both borrowers and non-borrowing, surviving spouses
  • The number of complaints to HUD against OneWest/Financial Freedom since 2009, as well as the types of complaints and resolutions
  • Information on HUD's process for creating new policies to address the issue of widow foreclosures
  • The number of current non-borrowing spouses who could potentially face foreclosure because they are not named on the mortgage

"We are hopeful this lawsuit will be resolved quickly so the fee waiver is granted, the data we seek in our FOIA request is produced by HUD and the public is granted access to this important information," Stein said.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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