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Three surviving spouses of reverse mortgage borrowers filed a lawsuit today against the Department of Housing and Urban Development (HUD), alleging that the agency had abandoned long-established federal rules and violated protections for surviving spouses, with the result that the three individuals are now facing imminent foreclosure and eviction from their homes.

The case will have broad national implications, because the outcome will determine whether spouses will be able to stay in homes that are now “underwater” as a result of the housing downturn, a possibility that reverse mortgage borrowers have always paid insurance premiums to protect against.

1. What is a reverse mortgage? Explain how they would work in terms of accounting.
2. Assume you have your own CPA firm. After reading this article, if you had an elderly client in a second marriage with a reverse mortgage, what would you advise them? Write out your advice in memo form.
3. What is the HUD rule that is at the heart of this suit? What does “underwater” mean? Summarize the basis of the suit in your own words.


AARP staff. (2011). HUD Targeted in Suit for Illegal Reverse Mortgage Foreclosure Actions, AARP Press Center Release, March 8 (Retrievable online at