How Servicers, Originators Can Prevent Reverse Mortgage Defaults

The reverse mortgage industry has been under scrutiny in recent weeks over tax-and-insurance defaults, with the Washington Post highlighting several seniors’ issues with servicers and the Department of Housing and Urban Development instituting new rules to help protect the Mutual Mortgage Insurance Fund from losses.

One group in California has been attempting to provide resources to seniors before they find themselves facing eviction, applying lessons learned during the subprime mortgage crisis to the Home Equity Conversion Mortgage marketplace. HOPE NOW — an alliance of mortgage servicers and other stakeholders — has assisted about 250 seniors since turning its focus onto reverse mortgage holders, offering free advice at five events so far this year in the Golden State.

Eric Selk, the group’s executive director, said his organization has taken direct inspiration from the recession in the late 2000s and early 2010s, when people were losing their jobs en masse and the mortgage industry was struggling to keep up with the vast amount of homeowners falling behind on their payments.


“There were a lot of different moving pieces that you had to coordinate,” Selk told RMD, describing a disconnect between lenders, servicers, and government regulators.

His organization ended up helping homeowners receive 7 million loan modifications, and HOPE NOW intends to bring the same hands-on approach to the reverse mortgage space.

Calling a servicer can be frustrating, and doesn’t easily facilitate the often family-focused process of dealing with reverse mortgage issues: A borrower’s daughter, for instance, may need to weigh in on possible solution, but might not be available for a long, drawn-out discussion over the phone.

“It’s that face-to-face service that they’re very, very happy with,” Selk said of the response so far. “Very consistently, people are coming in groups or pairs, so it really is a family decision when you’re looking at what’s on the table.”

HOPE NOW has begun working with some reverse lenders, including Finance of America Reverse, to build the industry connections that can help seniors avoid defaults; servicers Champion and Financial Freedom are already on board, Selk said.

Scott Norman, FAR’s vice president of field retail and government relations, emphasized how counselors at HOPE NOW can guide troubled borrowers through difficult life situations — such as the death of a spouse.

For instance, Norman pointed out that in many couples, one partner takes the lead with the finances, and the other may not know the ins and outs of the reverse mortgage process — such as the due dates of tax and insurance payments. Even if both spouses underwent the counseling process and paid close attention, that initial session could have occurred years before the death of one partner, and the surviving spouse may not remember the exact details; 82% of HOPE NOW’s reverse mortgage participants reported having their HECMs for six years or more.

The goal of programs such as those run by HOPE NOW, then, is to provide long-term counseling that doesn’t just end when the loan closes.

“There’s not a scenario in which you need to be scared or concerned,” Norman said. “We’re here to help you.”

Positive results 

The group picked California to focus on the largest market for HECMs in the country, and so far the response has been positive: 91% of attendees found the events helpful, according to data collected by HOPE NOW, and 92% reported that they had no further questions after talking with the organization’s staff.

HOPE NOW has two more events planned for the rest of the year — one in West Covina, Calif. on September 16, and another in Rialto, Calif. on October 14. Going forward, Selk said he hopes more lenders will send representatives, as many reverse mortgage borrowers still see the original lender or broker as the face of the transaction.

“I think that’s the role of the financial lender,” Selk said. “The person in power is responsible for good communication, and they are in power.”

Written by Alex Spanko

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  • I applaud HOPE strategy to offer “advice” over the course of the loan. However: HUD has instituted new rules many time to “protect” the MMI fund. The result is $12 Billion in taxpayer bailouts since 2009. Yet again the MMI fund is in the red for billions. Everyone knows the definition of insanity is doing the same thing over and over and expecting a different result. When defaults for T & I have increased from 10% to 18 % of HECM loans (just one issue) the entire program needs a complete overhaul.
    HUD and lenders must shift gears to make the HECM program safe for consumers and sustainable for the MMA and lenders. Until the program is addressed as a whole with consumer suitability as the first priority the result will always be the same.

    • Sandy,

      There has been just one taxpayer bailout and that was $1.7 billion. $12 billion is the amount that the MMI Fund has paid out to buy and hold HECMs under their assignment provision and also to reimburse lenders for any qualified claims. While none of the claims are recoverable, most if not all of the monies paid to acquire HECMs should be. A taxpayer bailout is a payment made by the Treasury to offset expected permanent HECM net cash losses at HUD.

      At a time when forward mortgages were suffering from even larger percentage of property charge defaults, HECMs were not any sense where we wanted them to be but even today, the chances of default from not timely paying property charges is very, very low. No mortgage program will ever be free of defaults.

  • John,

    Hopefully you are right. Based on so little information, it is hard to look at HOPE NOW as anything but interesting. To date their operations are limited to California.

    What is odd is that the MBA along with two other trade associations have joined HOPE NOW but where is NRMLA?

    If this organization is as trustwothy as it seems, it is hard to understand why NRMLA is not part of it. After all when the property service charge payment default size became public, NRMLA and according to Marty Bell in a RMD comment years ago, NRMLA senior leadership and some of the larger lenders rushed to hold a lunch with Dr. Barbara Stucki to plan and fund an experimental counseling program through NCOA to help HECM borrowers who were in default on their property service charge payments.

    It would be interesting to find out why NRMLA is withholding its support for HOPE NOW.

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