The recent lawsuit filed by AARP against Wells Fargo and Fannie Mae seeks class action status to include all borrowers, including their heirs and estates, that were not provided the opportunity to purchase the subject homes for 95% of appraised value.

In a review provided to NRMLA, the organization's legal counsel Weiner Brodsky Sidman Kider, PC discussed the proposed class and the rule, termed "the 95% Rule" that is the key allegation against the defendants.

In requesting class action status, the review says, AARP proposes a class that includes all borrowers under HECM loans of Wells Fargo and Fannie Mae, including their heirs and/or estates, whose homes were sold at foreclosure without being given the right to purchase the homes under non-recourse provisions.  The suit also calls for a sub-class for all potential class members whose homes were located in California.

Should the class be confirmed, it would include all loans sold to Fannie Mae by Wells and other lenders.  However, the lawsuit does not currently include loans placed into Ginnie Mae HMBS securities.

The suit seeks declaratory relief that bars the defendants from foreclosing on class members until they given the right to purchase the homes for 95% of appraised value.  The lawsuit points to the "Grounds for Acceleration of Debt" clause in the HECM statute that states a lender shall not have the right to begin foreclosure until the borrower has been given sufficient notice to "sell the property for the lessor of the balance or 95% of the appraised value and apply the net proceeds of the sale toward the balance." 

The allegations against the defendants also includes breach of contract, and unfair and deceptive acts and practices claims under California law.

AARP's filing also points to another paragraph from HECM law and standard loan documents that provides:

"Whether or not the mortgage is due and payable, the mortgagor may sell the property for at least the lessor of the mortgage balance or the appraised value… the mortgagor may sell the property for at least the lesser of the mortgage balance of file percent under the appraised value."

Included in the filing is a demand for a jury trial.