A reverse mortgage converts home equity into retirement cash, but every charge added to the loan balance leaves less equity for the borrower or the estate. An ongoing proposed class action backed by AARP Foundation says three major firms added fees that federal rules and loan contracts prohibited, then calculated interest and mortgage-insurance charges on the inflated balances. The accusations have not been adjudicated, but they identify a costly place for older homeowners and heirs to inspect their statements.
The Rizzati Case Names Celink, Finance of America Reverse and Carrington
The lawsuit, Rizzati and others v. Celink, Finance of America Reverse and Carrington Mortgage Services, was filed in the Eastern District of New York as case 2:26-cv-00277. AARP Foundation attorneys, working with private law firms, represent named plaintiffs and seek class treatment for similarly situated borrowers. AARP’s current litigation docket continues to list the case, supporting its description as an ongoing lawsuit rather than a new filing or a resolved judgment.
AARP’s current litigation docket identifies four categories of alleged unlawful charges: attorneys’ fees, property-inspection fees, property-preservation fees, and appraisal fees. The complaint also alleges failures to provide notices required before paying property charges, declaring loans due, or starting foreclosure. The defendants can contest those allegations, and the court has not determined liability.
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Disputed Fees Can Compound Against the Loan Balance
A Home Equity Conversion Mortgage does not usually require monthly principal-and-interest payments while an eligible borrower remains in the home and meets the loan conditions. Instead, interest and other permitted charges generally accrue to the balance. That design makes an improper fee more expensive than its face amount because it can remain in the balance and generate further charges.
AARP’s January 29 description of the complaint says named plaintiffs were charged thousands of dollars. One allegedly incurred more than $14,000 and another $17,000 in attorneys’ fees, while AARP says the applicable HUD limit for a New York foreclosure attorney fee was $725. Those figures are allegations in pending litigation, not court findings.
Home Equity Pays Every Dollar Added to a Reverse Mortgage
The economic effect reaches beyond a monthly statement. A larger reverse-mortgage balance reduces the amount left when the home is sold or the loan becomes due. If heirs want to keep the property, a disputed balance can increase the amount they must resolve. If the home is sold, fees and accumulated charges can reduce the estate’s proceeds.
That is why inspection, preservation, appraisal, and legal charges deserve line-by-line review. A borrower may assume a servicer charge is automatically authorized because it appears on an official statement. The lawsuit’s theory is the opposite: servicing systems allegedly placed prohibited or unreasonable charges into balances and then treated those balances as the base for more interest and insurance premiums.
HECM Loans Carry Federal Rules and Continuing Duties
HECM is the federally insured reverse-mortgage program overseen by the Department of Housing and Urban Development. HUD’s single-family mortgage program page identifies HECM as the reverse-mortgage option for homeowners age 62 or older. Borrowers still must meet loan duties such as paying property taxes, maintaining required insurance, and keeping the home in acceptable condition.
Servicers can take legitimate protective steps when those duties are not met. The dispute is whether specific charges complied with federal limits, state law, and the mortgage contracts, and whether notices were properly sent before foreclosure-related action. A statement showing a fee does not settle that legal question, but a missed tax or insurance obligation does not automatically make every later servicing charge improper either.
Statements, Notices and Loan Histories Build the Evidence
A borrower or authorized family member reviewing a reverse mortgage should collect periodic statements, fee descriptions, inspection notices, property-charge letters, foreclosure correspondence, and the full transaction history. A written request to the servicer can ask what work was performed, when it occurred, who performed it, and what contract or rule authorized the amount. Proof that taxes and insurance were paid can answer a claimed default.
HUD-approved housing counseling agencies can help explain HECM obligations, while an attorney can evaluate a servicing or foreclosure dispute. Complaints can also be directed to the Consumer Financial Protection Bureau and the relevant state regulator. Immediate attention matters when a notice identifies a cure date, sale date, or deadline to dispute an error.
The Pending Case Is a Warning, Not a Refund Program
The plaintiffs seek reimbursement or reversal of disputed fees, but the lawsuit does not establish that every borrower was overcharged or that money is currently available to claim. No open claim deadline or automatic payment follows from the filing. Its value today is as a document-backed warning: reverse-mortgage fees consume equity, and compounding can turn a questionable line item into a much larger estate cost. The live AARP docket and the loan’s own servicing history are the proper sources for tracking what happens next.
This article was produced with AI assistance and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
