Waters Introduces Bill Aimed at Reducing Reverse Mortgage Foreclosures

Congresswoman Maxine Waters (D-Ca.), member of the Committee on Financial Services, introduced a bill on October 27 that is aimed toward preventing unfair foreclosures among seniors with Home Equity Conversion Mortgages.

Titled “Preventing Foreclosures on Seniors Act,” the legislation focuses on reforms to HUD’s HECM program that would help borrowers and non-borrowing spouses of reverse mortgage borrowers avoid losing their homes.

Among other provisions, the bill proposed reforms to the HECM program that would require loss mitigation for borrowers in default; enforce that non-borrowing spouses are treated as borrowing spouses for the purpose of loss mitigation; require mandatory assignment of HECM loans to HUD if there is an eligible non-borrowing spouse living in the home upon the death of the borrower; enforce mortgagees to provide prompt notice to a surviving non-borrowing spouse of their eligibility to remain in the property if they meet certain basic requirements; and prevent foreclosures on non-borrowing spouses once the loan is assigned to HUD, unless they fail to meet certain basic requirements.

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“Unfair foreclosures on seniors continue to be a problem in the Department of Housing and Urban Development’s reverse mortgage program. This bill makes key changes to help seniors who are vulnerable to foreclosure under the current program,” Waters said in a press release. “It is critical that we take every possible step to ensure that seniors who take out reverse mortgages, and particularly their surviving spouses, do not unfairly lose their homes.”

Congressman Denny Heck (D-Wa.) is an original co-sponsor on the bill, which has backing by the National Consumer Law Center (NCLC) and the California Reinvestment Coalition (CRC).

The proposed legislation comes following several reverse mortgage program changes that also are geared toward protecting borrowers and non-borrowing spouses, including changes in 2015 that provided more opportunities for those individuals to remain in their homes in the event that a borrower has passed away.

Written by Carlo Calma

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  • Rather than reaching out to HUD policymakers, Ms. Waters once again takes the natural road of Democrats as clearly seen in HERA; make laws that satisfy political goals but do little more. Or said another way, if it works then see to it that laws are made to stop “the miscarriage of justice.”

    I understand some of their concerns regarding Mortgagee Letter 2015-15 but their proposal goes too far.

    • Agreed. However, with a cursory reading of the proposal, I actually agreed with one aspect of the act – HECMs shouldn’t be due and payable for property charge arrearages of less than $2,000 [3(A)(i)(V)]. The foreclosure process is too expensive and disruptive for such a small default amount. That amount is also small enough that loss mitigation efforts might actually work for a change.

      • Nope. To your point, HUD may have the authority to change that threshold though Mortgagee Letter if needed.
        I don’t have the data, but it’s my understanding that loss mitigation is generally ineffective. In essence, why push for more, unless you have a political motive.

      • Dan,

        I was concerned for a couple of days. If you listen carefully to the spontaneous ideas of Ms. Waters, well, at times she can remind me of Ted Kennedy, a popular idea supported by a lot of gibberish.

  • Ms. Waters, she sure does move in strange directions. For a starter, the Non-Borrowing spouse is protected and allowed to stay in the home upon the death of the borrower until she or he passes on.

    I say that with the condition the Non- Borrowing spouse went through the required procedure when the HECM was taken out in the first place. If that was not the case, than that is a different story all together!

    Ms. Waters does not mention that as far as I can see?

    I agree with Dan Hultquist when he says, “HECM’s shouldn’t be due
    and payable for property charge arrearages of less than $2,000”!

    I also agree with everything my friend “The Positive Realest” stated in the comment made.

    Ms. Waters, if she only understood what she says and proposes? We the tax payers actually pay this congressman to represent the people, sad!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      Please read Mortgage Letter 2015-15 carefully. It is up to the lender whether the electing non-borrowing spouse — who qualified for a deferral and has a HECM with a case number assigned before 8/4/2014 — will have the balance due deferred or not.

      BUT for a non-borrowing spouse with a case number assigned after 8/3/2014, if the non-borrowing spouse qualifies, then all that is required is that the non-borrowing spouse elects deferral. The lender has no say in the matter. See Mortgagee Letter 2015-2.

      So not all non-borrowing are protected in the same way. That is why there are two separate Mortgagee Letters on the subject.

      Dan has now changed his position on being in arrear. I hope you have as well.

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