Nonprofit Sues HUD Over Reverse Mortgage Non-Borrowing Spouse Info

A California-based nonprofit organization recently filed a lawsuit against the Department of Housing and Urban Development (HUD) over a stalled Freedom of Information Act (FOIA) request regarding the impact of foreclosure on widowed spouses of reverse mortgage borrowers.

The suit, filed last week by the California Reinvestment Coalition (CRC), challenges HUD’s denial of a fee waiver for an FOIA request, which the CRC filed in 2014. 

CRC submitted the request for information after being contacted by widowed homeowners and advocates in the context of its protest against the $3 billion acquisition of OneWest Bank by CIT Group (NYSE: CIT).

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By filing the request, the CRC aimed to understand HUD’s role in overseeing the reverse mortgage industry; the national impact of foreclosures on widowed seniors due to reverse mortgages; HUD’s responses to these foreclosures; and the track record of OneWest Bank and its reverse mortgage subsidiary, Financial Freedom.

“We heard a number of troubling stories about widowed homeowners being foreclosed on by Financial Freedom,” said CRC Associate Director Kevin Stein in a written statement. “Given the national implications of this problem, we requested data from HUD on the number of people impacted and HUD’s process for designing a new policy.”

In June, HUD revised its guidelines concerning non-borrowing reverse mortgage spouses via Mortgagee Letter 2015-15. The new policy update allows lenders to defer foreclosure for certain eligible non-borrowing spouses for Home Equity Conversion Mortgage case numbers assigned on or after August 4, 2014.

CRC originally submitted its FOIA request in November 2014, believing that the request met the “public interest” requirement for a fee waiver. In its complaint filed against HUD, the CRC stated that as a non-profit, non-commercial requester, the organization is entitled to a waiver of any fees associated with these FOIA requests.

HUD, however, denied the fee waiver request in December 2014 for failing to satisfy the public interest requirement, which is contingent upon several conditions. 

These include: whether the subject matter specifically relates to the operations or activities of the government; whether the requested documents will likely contribute to an understanding of specific government activities or operations; whether the disclosure will contribute significantly to the public understanding on the part of the public at large; and whether disclosure will contribute significantly to the public understanding of government activities or operations. 

An appeal by CRC was also denied by HUD in March 2015.

HUD was not able to comment, as the agency’s policy does not permit it to do so on ongoing litigation, a HUD spokesman from the Office of Public Affairs told RMD via email.

In its lawsuit, the CRC claims HUD violated the FOIA when it denied the request for the fee waiver. The nonprofit seeks injunctive relief requiring HUD to grant the fee waiver request and process the FOIA request “as soon as practicable.”

“We are hopeful this lawsuit will be resolved quickly so the fee waiver is granted, the data we seek in our FOIA request is produced by HUD and the public is granted access to this important information,” Stein said.

Written by Jason Oliva

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  • Today there is more confusion about non-borrowing spouses than has been seen in years.

    Following the release of ML (Mortgagee Letter) 2015-15 on June 12, 2015, article after article has appeared incorrectly stating that ML 2015-15 applies to non-borrowing spouses whose spouses have (or had) CNAs (Case Numbers Assigned) after August 3, 2014; yet that is false.

    The following paragraph from the article above illustrates the misconception about what HECMs ML 2015-15 applies to: “In June, HUD revised its guidelines concerning non-borrowing reverse mortgage spouses via Mortgagee Letter 2015-15. The new policy update allows lenders to defer foreclosure for certain eligible non-borrowing spouses for Home Equity Conversion Mortgage case numbers assigned on or after August 4, 2014.” Please note the incorrect application of ML 205-15 as “on or after August 4, 2014.”

    In fact ML 2015-15 ONLY addresses non-borrowing spouses whose borrowing spouses have (or had) HECMs with case numbers assigned before August 4, 2014, as stated in the ML 2015-15 purpose clause as follows: “Pursuant to the authority granted in the Reverse Mortgage Stabilization Act of 2013, this Mortgagee Letterds regulations for HECMs with an FHA Case Number assigned prior to August 4, 2014….” For further information, please see:

    http://portal.hud.gov/hudportal/documents/huddoc?id=15-15ml.pdf

    ML 2014-07 addresses non-borrowing spouses whose borrowing spouses have (or had) HECMs with case numbers assigned after August 3, 2014 as stated in its “effective date” clause as follows: “The requirements contained in this Mortgagee Letter will be effective for all Case Numbers issued on or after August 4, 2014.” ML 2014-07 was posted on April 25, 2014 and as a result is only prospective. While ML 2015-15 was effective immediately upon posting, it only impacted HECMs with CNAs before 8/4/2014. As to ML 2014-07, please see

    http://portal.hud.gov/hudportal/documents/huddoc?id=14-07ml.pdf

    ML 2015-02 has two parts, one that clarifies and adds to Ml 2014-07 pertaining to non-borrowing spouses and a small section that clarifies and adds to requirements for seasoning of existing mortgages as addressed in ML 2014-21. The effective date of ML 2015-15 which pertains solely to non-borrowing spouses is as follows: “The Eligible and Ineligible Non-Borrowing Spouse requirements contained in this Mortgagee Letter may be implemented for all HECM case numbers assigned on or after January 12, 2015, and must be implemented for all HECM case numbers assigned on or after March 9, 2015.” For further information, please see:

    http://portal.hud.gov/hudportal/documents/huddoc?id=15-02ml.pdf

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