A class action lawsuit is in the works against Wells Fargo and Fannie Mae over claims that they caused homeowners to loose their homes in unlawful foreclosures and evictions. The HECM Reverse Mortgage Class Action Lawsuit revovles around a key term of reverse mortgages that were associated with loans sold by Wells Fargo and owned by Fannie Mae. The lawsuit states that the companies failed to abide by the “95% Rule” term under reverse mortgages called “Home Equity Conversion Mortgages” (HECM). Under the HECM program, when a loan becomes due and payable, the borrower has the right to receive a 30-day notice that they may sell the HECM-mortgaged property for 95% of its current appraised value (the “95% Rule”), which amount may be less than the mortgage balance. The borrow can then sell or transfer the property for 95% of the appraised value, including to a family member.
Wells Fargo is a publicly owned national bank and was the nations number 1 issuer of retail reverse mortgage loans. In June of 2011 Wells Fargo announced they would no longer be in the reverse mortgage business due to unpredictable home prices but would still service existing reverse mortgage loans. The lawsuit is entitled Robert Chandler v. Wells Fargo Bank and Federal National Mortgage Association a/k/a Fannie Mae and will be held in the United States District Court, Northern District of California, San Francisco Division case number CV-11-3831. A complete copy of the Wells Fargo and Fannie Mae HECM Reverse Mortgage Class Action Lawsuit can be read here.