Wells Fargo & Co. was accused in a group lawsuit of ignoring federal rules on reverse mortgages and forcing homes into foreclosure instead of giving heirs a chance to buy them.
Estates and surviving spouses have the right to purchase properties at 95% of appraised value after the death of a borrower who took out a federally insured reverse mortgage, lawyers for a California man said in the complaint filed Aug. 3 in federal court in San Francisco.
Wells Fargo hasn't been notifying heirs of this right and has been starting foreclosures if demands aren't met for repayment of the full mortgage balance, said the complaint, filed by the son of a California homeowner. The plaintiff, Robert Chandler, also sued the Federal National Mortgage Association, or Fannie Mae.
Michael Ng, Chandler's attorney, said in a statement. "Even though elderly borrowers paid for insurance that protects the bank against the downturn in the housing market, Wells Fargo insists on evicting family members from homes that will go unsold and unoccupied."
The lawsuit, brought as a class action by Chandler on behalf of himself and other heirs, seeks a court order stopping foreclosures and evictions, and damages for breach of contract.
Wells Fargo is "reviewing" the complaint and "will reserve comment," Vickee Adams, a spokeswoman, said.
