AARP Foundation sues Celink, RMF alleging unlawful reverse mortgage servicing fees

The suit, originally filed in 2022, claims the companies “added various types of unlawful loan servicing fees that violate reverse mortgage contracts and federal and state laws”

The AARP Foundation has joined a class-action lawsuit against reverse mortgage servicer Celink and the estate of bankrupt lender and servicer Reverse Mortgage Funding (RMF) alleging the two companies added “various types of unlawful loan servicing fees that violate reverse mortgage contracts and federal and state laws,” according to an announcement.

The suit, originally filed in late 2022 in the Eastern District Court of New York, alleges “systemic violations by Celink and RMF of borrower protections provided by standard [Home Equity Conversion Mortgage (HECM)] loan agreements, federal laws and New York State laws,” according to the initial legal complaint obtained by RMD.

The complaint, HECM servicing fees

“In particular, Celink at the direction and approval of RMF, applies numerous companywide policies and/or practices designed, intended and having the effect of adding fees, costs, charges and penalties to HECM loans serviced by RMF, and subserviced by Celink, in a manner that violates federal and state HECM borrower protection laws and regulations, and as a result, breaches standardized HECM loan agreements,” the complaint alleges.

Law firms Tusa P.C. — which specializes in class action cases — and Giskan, Solotaroff & Anderson, LLP filed the suit on behalf of plaintiff Sheila Dancy-Wilkins and her 93-year-old mother, Flora Mayweathers, on behalf of a nationwide class.

“According to the suit, Plaintiffs secured a HUD-approved reverse mortgage (HECM), which are loans that allow older homeowners to convert part of their home equity into cash without having to sell their home or make monthly mortgage payments,” the AARP Foundation said in its announcement. “After RMF acquired their loan and hired Celink, both allegedly added unlawful fees for appraisals, inspections, property preservation, and attorneys’ fees or costs.”

Foreclosure and interest

The suit also claims that Celink did not provide a series of required notices before initiating a foreclosure action. The foreclosure was ultimately dismissed, but additional fees — which the plaintiffs allege are unlawful — were added to the plaintiff’s reverse mortgage loan balance. They continue to see additional interest charges and fees added to the “wrongfully inflated loan balance every month,” the Foundation said.

“Older homeowners worked hard to pay their mortgages. When they borrow from their home equity so they can age in place, they deserve fair treatment and protection,” said William Alvarado Rivera, SVP of Litigation for AARP Foundation, a charitable affiliate of the senior-focused interest group AARP. “Protecting the home equity of vulnerable older homeowners from deceptive and unfair practices is one of AARP Foundation’s strategic priorities.”

“Plaintiffs seek to stop reverse mortgage lenders and servicers from adding unlawful and unreasonable fees and costs to older homeowner’s reverse mortgage loans,” AARP Foundation added. “Plaintiffs also seek to remove the unlawful and inflated fees, interest, and insurance charges from the loan balances of borrowers whose loans were serviced by RMF or Celink. The lawsuit remains ongoing.”

RMF’s bankruptcy

Representatives for RMF — formerly the fifth-largest reverse mortgage lender in the country — notified the court of the company’s bankruptcy filing on Nov. 30, 2022, according to documents reviewed by RMD.

An automatic bankruptcy provision led to a delay of further actions against RMF. But the counsel of record withdrew representation of RMF in early 2023 after its business arrangement with the lender ended following the bankruptcy.

This past October, RMF’s bankruptcy plan administrator notified the court that it “does not intend to appear on behalf of RMF or file any responsive pleadings” in connection with the case.

“Importantly, Plaintiff has agreed that any claims arising from this action will be treated as general unsecured claims against the estate [of RMF],” the letter said on behalf of the plan administrator.

The plaintiffs, however, responded that they would seek a default judgment against RMF.

“In RMF’s bankruptcy proceedings, RMF filed schedules representing that Plaintiffs’ class claims in this action are covered by its insurance policies,” according to a letter from plaintiff attorney Joseph Tusa. “Those insurance policies provide potentially tens-of-millions of dollars of insurance coverage to satisfy any default judgment entered against RMF.”

New Jersey state law applies to those policies, the plaintiffs said. That means the plaintiffs will be “entitled to enforce that judgment against RMF’s insurance carriers. This action remains viable against RMF, even in default and despite its bankruptcy,” the letter explained.

A representative of Celink told RMD they are unable to comment on any pending litigation. RMF’s estate declined to comment.

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