Ding Ding!  Here comes “Round 2” from Atare Agbamu in his second installment of An Assault on Fairness: Quash Mortgagee Letter 2008-38 (Part 2).  In Round 2, he discusses how the arms-length rule in the ML has the potential to arouse anger and alienate seniors’ heirs and relatives, which he calls the “core centers of influence, essential to continued HECM and reverse mortgage acceptance by seniors.”

He writes that despite consistently high customer satisfaction with HECM and reverse mortgages, he believes that  HUD’s non-recourse policy discourages seniors and their heirs from using a HECM and is unwise and counterproductive for all seniors, federal treasury (taxpayers), and the industry.

He describes a recent meeting with a senior and her daughter explaining the new arms-lenth rule and the “clarified” HECM non-recourse policy found in ML 08-38 and was interrupted by the daughter who said:

“This policy amounts to elder abuse [emphasis added] by our federal government! They collect hefty mortgage insurance premiums from seniors. Then, they arbitrarily deny them and their heirs one of the benefits of those expensive premiums?” “It is an outrage! It stinks!!”

I’m not sure I agree that it’s elder abuse, but I can understand her frustration.  I thought the most interesting part of his argument was how the “clarified” non-recourse policy could keep the under age spouse of a HECM borrower from buying their home directly.

Imagine the younger spouse was taken off title due to her age when her husband decided to get a reverse mortgage.  Should she want to refinance the HECM that her late husband used but is unable to since the balance is more than the value of the home.  Someone who isn’t related to the family could come in and buy the property at the appraised value, but not the widow.

Again, Atare brings up some great points, read it at the link below.

An Assault on Fairness: Quash Mortgagee Letter 2008-38, part 2

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