Is Oregon’s Tax Deferral Program the Answer to HECM T&I Defaults?

As federal regulators ruminate over what to do about seniors who fail to pay taxes and other costs associated with property ownership, the State of Oregon continues to operate a humanitarian program that has been providing this support for nearly half a century.

Residents of the “Beaver State,” age 62 or older with an annual income below $38,000, may apply for the “Senior Property Tax Deferral Program,” which covers county property tax payments. The state pays the taxes and places a lien against the property, which goes in 3rd position and is repaid when the property is sold or refinanced. A 6 percent simple interest charge is tacked onto the eventual balance paid off.

“This is a perfect solution for my customers that have problems keeping up the annual tax payments,” says Donna Lea Brooks, a self-described “HECM Advocate,” whose resume cites service as a HUD HECM Counselor for a local senior assistance agency.

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The Oregon tax deferral program, initiated in 1964, has been “working very well,” according to Debbie Saalfeld, administrative specialist in the deferral unit of the Oregon Department of Revenue, which administers the program. Saalfeld tells RMD that there are currently 10,000 such accounts, only a small percentage of which are tied to reverse mortgages, although that is expected to expand.

Some of this support has “gone on for years,” Saalfeld reports, in a few cases with individual balances exceeding $200,000.

Total outstanding debt for the program is $19 million – an average of $1,900, per household. “This is quite a trusting program,” Saalfeld comments, noting that applications to join must be filed between Jan. 1 and April 15 each year. This year, about 1,800 applications have been filed, equal to the number last year and representing a higher-than-normal number of annual submissions.

Programs such as the one in Oregon that help seniors avoid loss of their homes for failing to pay associated and mandatory charges, are being reviewed carefully by HUD, according to Meg Burns, director, FHA Office of Single Family Program Development, who recently told RMD that “our counselors soon will use tools designed by the National Council on Aging to evaluate whether a senior is eligible for any other public services, including state and tax deferral programs. That will be a useful part of our policy proposals going forward,” according to Burns.

Written by Neil Morse

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  • Seeing how vital tax deferral programs are as a partial solution to the tax default issue, NRMLA, in concert with senior advocacy groups and community development organizations, should work to create more TD programs across the country. It would be a win-win for seniors and the industry, the best PR that money cannot buy.

  • Florida also has a TD program. I was always under the impression that one could not do both – the HECM and the TD (even if in third position). Apparently I was incorrect. This is great news, as it is a great option for seniors.

  • I believe that California stopped the tax deferral program several years ago. Part of the reasoning was that a negatively amortizing Reverse and a declining property value did not mix well.n

  • Neil,rnrnThanks for posting this article, as I think it is very timely and provides some great information about a potential mitigation option to the T&I Default issue our industry is facing. rnrnMassachusetts has a similar program (and I also believe California) whereby a HECM borrower can engage in a tax deferral program. The reason that HECM borrowers can participate in these types of programs in these States is that the deferral takes a subordinate lien position behind the HECM.rnrnI know that, as a servicer, I would love to see other States adopt a similar stance as Oregon, Massachusetts, and California and provide this subordinated tax deferral lien as an option for seniors.

  • Neil,

    Thanks for posting this article, as I think it is very timely and provides some great information about a potential mitigation option to the T&I Default issue our industry is facing.

    Massachusetts has a similar program (and I also believe California) whereby a HECM borrower can engage in a tax deferral program. The reason that HECM borrowers can participate in these types of programs in these States is that the deferral takes a subordinate lien position behind the HECM.

    I know that, as a servicer, I would love to see other States adopt a similar stance as Oregon, Massachusetts, and California and provide this subordinated tax deferral lien as an option for seniors.

  • Florida also has a TD program. I was always under the impression that one could not do both – the HECM and the TD (even if in third position). Apparently I was incorrect. This is great news, as it is a great option for seniors.

  • Seeing how vital tax deferral programs are as a partial solution to the tax default issue, NRMLA, in concert with senior advocacy groups and community development organizations, should work to create more TD programs across the country. It would be a win-win for seniors and the industry, the best PR that money cannot buy.

  • Seeing how vital tax deferral programs are as a partial solution to the tax default issue, NRMLA, in concert with senior advocacy groups and community development organizations, should work to create more TD programs across the country. It would be a win-win for seniors and the industry, the best PR that money cannot buy.

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