Months after their lawsuit prompted HUD to rescind Mortgagee Letter 2008-38 AARP has filed a new lawsuit alleging Wells Fargo and Fannie Mae continue to fail to provide families the ability to purchase homes for the appraised value according to the non-recourse provisions of the HECM program.

The suit, filed in the U.S. District Court for the Northern District of California in San Francisco requests class action status and seeks an injunction prohibiting illegal foreclosures and evictions, including damages for breach of contract. The suit alleges that plaintiffs were never informed of their right to purchase the properties at the current value after the reverse mortgage borrowers passed away and were rather informed that they would be required to pay the full reverse mortgage balance.

Robert Chandler of Elk Grove, California is the representative plaintiff in the suit. His mother died in 2010, five years after obtaining a reverse mortgage. Following her death, the suit alleges that he was never notified of the non-recourse provisions that provides that heirs to a property can never owe more then the value of the home. Fannie Mae began efforts to evict him from the property.

“Mr. Chandler’s case is not an isolated one," said Jean Constantine-Davis, a senior attorney with AARP Foundation Litigation. "In the wake of HUD’s reversal of its rule on the rights of surviving spouses and heirs earlier this year, we have been contacted by many, many others facing the same problem. It is difficult to understand why reverse mortgage lenders continue to deny them their contractual and legal rights.”