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AARP sues Wells Fargo, Fannie Mae over reverse mortgage foreclosure

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Aida Lemus, 70, cries as she is evicted from her foreclosed condominium in Anaheim, California, June 23, 2009.  REUTERS/Lucy Nicholson AARP’s legal battle against wrongful reverse mortgage foreclosures has shifted from government regulators to lenders.

The AARP Foundation Litigation unit filed a class action lawsuit yesterday against Wells Fargo Bank and the Federal National Mortgage Association (Fannie Mae), charging that they failed to allow surviving spouses and heirs of reverse mortgage borrowers to purchase the property for the appraised value after loans came due — typically after the borrower’s death.

AARP’s litigators won an earlier round on reverse loan foreclosures in April, when the U.S. Department of Housing and Urban Development (HUD) reversed itself on a rule that was forcing spouses borrowers into foreclosure.

At the heart of the dispute is what happens to the most popular type of reverse mortgage, the Home Equity Conversion Mortgage (HECM), which is regulated and insured by HUD passes on to a spouse or an heir. The HECM is designed so that borrowers can never owe more than the value of their homes, even though the loan balances rise over time. The intent was to assure elderly borrowers that HECMs were safe.

Trading up in a down housing market

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There’s no getting around it: In much of the country, this is a terrible time to unload your home.

Roughly 11 million mortgages are now “underwater” and over a million properties are in foreclosure proceedings. Even after all the carnage, home prices in 20 U.S. cities just dropped by the most in 18 months.

Luxury real estate: How to snag a deal on a foreclosure or short sale

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Opportunities to buy foreclosed — or soon-to-be foreclosed — luxury homes are on the rise. But watch out for the pitfalls that could sour what seems like a sweet deal.

“We’re certainly seeing more of those properties coming to market and more of those properties foreclosed on,” says Rick Sharga, senior vice president of RealtyTrac Inc., publisher of the largest database of foreclosure and bank-owned property records.

Wells Fargo exit underscores trouble in reverse mortgage industry

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The country’s largest reverse mortgage lender is exiting the business, saying the loans have become too risky in the current climate of falling home values.

Wells Fargo & Co. said last week it will stop originating new reverse mortgage loans at the end of June, expressing concern about rising loan defaults and the threat of foreclosures foreclosures among seniors. The bank — which accounts for 26 percent of the market — will continue to service 125,000 existing loans it has already written. Wells Fargo’s decision follows Bank of America’s exit from the market in February.

Homeowners, don’t be fooled by this foreclosure scam

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Marc Charney, president of CharneyRealEstate.com, hangs a sign reading 'Foreclosure For Sale' on a house in the Boston suburb of Dedham, Massachusetts March 15, 2007. REUTERS/Brian SnyderLooming foreclosure can be one of the scariest times for any family down on its luck. So, it stands to reason that crooks would design scams to target that vulnerability and try to squeeze whatever money these people who can’t pay their bills can scrape up.

The state of California has issued a warning about a scam that involves getting these vulnerable homeowners to pay fees up front with the idea of winning a lawsuit that will get them their homes free and clear. The cost to participate in this heavily marketed scam is $5,000.

AARP lawsuit: Reverse mortgages cause foreclosures

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Realtor Mac McCollum stands in front of a foreclosed home in Bullhead City, Arizona, November 4, 2009.  REUTERS/Lucy NicholsonReverse mortgage ads often portray contented silver-haired couples enjoying the comfort of home, confident that their decision to tap home equity will bring lifelong financial security.

But the AARP Foundation painted a different picture when it filed a lawsuit this week challenging federal rules said to be forcing borrowers into foreclosure.

Home market isn’t on rebound yet

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A vacant house for sale is pictured at the Green Valley Ranch neighborhood in Denver, Colorado July 26, 2007.  REUTERS/Rick Wilking Are we there yet? Is the U.S. home market on the upswing?

As Alan Greenspan would say, “there are shoots,” although a true spring in housing is still hampered by a chilly economic climate throughout most of the country.

One positive sign came from new mortgage applications, which jumped to the highest level in three months last week, according to the Mortgage Bankers Association.

Real estate: First-time homebuyer basics

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Dennis Lee and his wife Dana are pictured in this undated handout photo. REUTERS/HandoutDennis Lee, 26, is a model first-time homebuyer. Recently married, he and his wife, Dana, have financially secure jobs as a youth minister and accountant, respectively. They have good credit scores, and have been studying property price graphs and charts in their local San Francisco Bay Area for months.

With enough cash for a 20 percent down payment, and ample time to look, you would think Lee would be excited to take advantage of a probable bottoming of the market in 2011. Not exactly. “It’s a little overwhelming,” he says.

First-time buyers forgo starter homes: survey

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Prospective buyers visit an open house for sale in Alexandria, Virginia April 6, 2008.   REUTERS/Jonathan Ernst  Looking to cash-in on rock-bottom home prices, first-time buyers are thumbing their noses at traditional “starter homes,” setting their sights on move-in-ready real estate, according to a new survey from Coldwell Banker Real Estate.

Of the 300 buyers surveyed, 87 percent said finding a move-in-ready property was important to them.

A solution to the mortgage mess?

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Police tape marked as a Foreclosure Free Zone is seen outside the foreclosed home of Marie Elie in Elmont, New York, April 9, 2009.  REUTERS/Shannon Stapleton  If you thought the U.S. foreclosure crisis was ebbing, think again. Every passing week brings with it new tales of mortgage loan defaults, and allegations of foreclosure malfeasance on the part of some banks.

Mortgage loan defaults are actually on the rise once more, which begs the question: is there are better way to structure their financing?