Refis: A Solution for HECM Defaults?

NewImage.jpgThe taxes and insurance guidance issued by the Department of Housing and Urban Development is a good “first giant step” according to Marc Helm, president and chief operating officer of Reverse Mortgage Solutions.

Helm told Origination News the mortgagee letter puts some parameters about what HUD wants done in these situations, which until now had been a gray area.

An area that concerns Helm is the guidelines for the repayment plan, which puts a 24-month limit on arrears over $5,000.  “If somebody owes $10,000 worth of taxes, if they weren’t able to pay it, I don’t think they are going to be able to pay it back on a 24-month repayment plan,” he said.


Having the ability to refinance the borrower is one of the better tools HUD has provided borrowers, but whether or not that is a possibility is another question.

The agency also put “heavy duty reporting requirements” so it will monitor what servicers are doing and not doing, he noted.

“As we work through this mortgagee letter and all the pieces in there, I think we can give HUD some very solid feedback,” Helm stated. HUD spent a lot of time speaking with the industry to put this together and he called this a good starting point. But, he continued, is this enough to make a difference, which is something only time can tell.

“All of us in the industry want all of this to work, so any tools that HUD can give us to work with the borrowers a little bit better to have them stay in their homes, that is the end goal here.  The end goal here is not to foreclose people, it is to keep people in their houses,” Helm said.

Refis an Option For Delinquent HECM Borrowers

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  • Rather than presenting unverified statistics for the sake of sensationalism or seeing one’s own name in print as one industry participant recently did, Marc provides a very balanced picture of the new Mortgagee Letter and how his firm is looking at the default situation. His presentation is rational, calming, and caring. His manner and statements suggest that his firm is actively pursuing solutions within the guidelines mandated by HUD — which confirms why our firm chose RMS.

    It seems the counseling agency executive views the defaults as de facto foreclosures while Marc is looking at how to prevent defaults from becoming foreclosures. So exactly what value is counseling bringing to the default process? It seems counseling is resigned to foreclosures and have thus resorted to public pronouncements of how widespread it is, while servicers seem far more concerned about keeping seniors in their homes. The recent comments of counseling executives sound more like “less than responsible” whistleblowers than problem solvers. The contrast could not be greater.

    While having confidence in RMS, there is not one client I would recommend seeking default counseling from the counseling agency of the executive who felt compelled to get out in front of HUD to put in her two cents about the Florida HECM default numbers and percentages. Her statements showed little, if any, concern for those in default. As public as her statements, so should her condemnation be.

    It seems servicers are acting responsibly. I wish the same could be said about counseling.

    Kudos to Marc, RMS, and the servicing part of our industry.

  • Cynic,

    Did I miss something? When was a refi not allowed for a borrower in T&I default before the mortgagee letter was issued? That appeared to be the only piece of hard information that Marc shared in the article, other than his justified opinion on the limits for repayment plan terms.

    RMS is a reputable organization, but they certainly are not the only ones that are working closely with HUD, the counseling agencies and NRMLA to avoid foreclosure on every single borrower possible.

    While I did not agree with the comments made in a previous article by a counseling agency, I certainly don’t think that you (or anyone) are in a position to judge the quality of a particular default counseling agency – as the process started just a few weeks ago.

    It was irresponsible of the counseling agency to say what they did, but also irresponsible of you to pass judgment on a counseling agency for showing no “concern for those in default”.

    • ReverseGuy,

      Admin is quoting Marc from another publication where he is discussing the technical default issue and ways RMS is looking at helping seniors cure their defaults. If he was talking to our industry your comment would be appropriate.

      What you seemed to have missed is the recent tone of counseling agency execs on this subject in the media. They are speculating on the number of the defaults rather than helping seniors and the general public understand that these are not necessarily irreversible defaults. Further they are not discussing cures but rather dispensing fear over its magnitude.

      One unnamed counseling agency exec is quoted in US News as saying an undisclosed industry document states that 20% of all HECMs are in some stage of noncompliance. A reporter for a major Florida newspaper quotes another counseling agency exec as saying total technical defaults are 30,000 with 5,300 of them in Florida. You would think the counseling execs would have discussed the fact that these defaults are not necessarily irreversible and HUD and servicers want to work with Seniors to correct the situation wherever and whenever possible. Instead each had to speculate about the extent of the problem.

      Marc on the other hand did what the counselors should have been doing. I appreciate someone is saying to the public HECM borrowers in default may be able to fix the problem through refinancing. One is the voice of fear mongers and the other of reason and problem solving.

  • The tax and insurance defaults are a problem all in the industry need to get a handle on. In Michigan senior homeowner’s whose income falls within certain guidelines are eligible for an exemption in whole or in part of their property taxes for that year. I make it a point to educate all of my former clients of their rights under Michigan law. Most have received exemptions ranging from 40% to 100%. I have to believe other states offer similar programs.

    • gciungan,

      There is little doubt that exemption and deferral programs will be discussed with those in default. BUT California gave up their deferral program this last year because of budget problems.

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