The pre-2014 HECM spouse protection gap just landed back in federal court
A newly filed federal lawsuit is challenging HUD's handling of non-borrowing spouse protections on reverse mortgages originated before August 2014.
The case, Kendall-Mayo et al. v. Department of Housing and Urban Development et al., was filed on March 23, 2026, in the U.S. District Court for the Eastern District of Virginia. It names HUD and Secretary Scott Turner as defendants, alongside Mortgage Assets Management, L.L.C., PHH Mortgage Corporation, Cascade Funding Mortgage Trust HB7, and MetLife Home Loans.
The lawsuit stems from a Home Equity Conversion Mortgage originated in 2011 by MetLife. According to the filing, the borrower passed away in December 2024, and his surviving spouse — who was not named on the loan — learned she was at risk of losing the home she had lived in for decades.
What makes the case significant for the mortgage industry is not just the individual story, but the regulatory gap it targets. Federal law defines "homeowner" under the HECM program to include the borrower's spouse, meaning Congress intended that reverse mortgages defer repayment until the death of both the borrower and the non-borrowing spouse. Courts have agreed. In Bennett v. Donovan and Plunkett v. Castro, federal judges found HUD's regulations fell short of that mandate. HUD eventually updated its rules, but only for loans originated after August 4, 2014. For legacy loans like the one in this case, no automatic deferral period was built in.
That distinction matters here. The filing alleges that the borrower's daughter, acting as executor of the estate, reached out to PHH Mortgage Corporation as early as January 2025 to explore options, including HUD's Mortgagee Optional Election program — the mechanism designed to let mortgagees assign pre-2014 loans to HUD so that non-borrowing spouses can stay in their homes.
The filing states that the investor declined to participate, without explanation. A family member acting on behalf of the surviving spouse reportedly made at least 21 calls to PHH over the course of the year, and the executor asked repeatedly to postpone the foreclosure. It went ahead anyway. On June 26, 2025, the property was sold at auction to Cascade Funding Mortgage Trust HB7, which the filing identifies as a trust whose trustee is Mortgage Assets Management.
The lawsuit raises four counts. It challenges HUD's regulations under the Administrative Procedure Act and seeks a declaration that the borrower's death did not trigger the foreclosure provisions. It also seeks reformation of the mortgage to include spousal protections.
A third count alleges PHH violated the Real Estate Settlement Procedures Act by failing to properly respond to a qualified written request — including withholding servicing notes, call recordings, and the identity of the person who denied the MOE request. The filing cites 2,364 mortgage-related complaints lodged against PHH on the CFPB's portal as evidence of a broader pattern. A fourth count alleges fraud at origination, claiming a MetLife representative told the borrower his spouse could remain in the home after his death — a representation the filing says induced him to take the loan.
No court ruling has been issued, and the claims have not been adjudicated.
