The number of reverse mortgage foreclosures surged significantly in 2016, according to a new analysis from a pair of nonprofits.
Between April and December 2016, the Department of Housing and Urban Development logged 32,976 reverse mortgage foreclosures — for comparison, the number recorded in the seven years between April 2009 and April 2016 was 41,237.
That data came from a Freedom of Information Act (FOIA) request filed by the California Reinvestment Coalition, a group that advocates on behalf of low-income borrowers, and the Florida-based Jacksonville Area Legal Aid.
“This new data adds to our concerns that HUD is asleep at the wheel when it comes to protecting vulnerable seniors from foreclosures that shouldn’t happen,” California Reinvestment Coalition deputy director Kevin Stein said in a statement announcing the results of the FOIA request.
“Seniors are losing their homes at an alarming rate, and HUD appears to be doing little more than rubber-stamping foreclosure requests by servicers who should be making every reasonable effort to preserve senior homeownership whenever possible,” Stein said.
Analyzing Home Equity Conversion Mortgage foreclosure trends tends to be more difficult than their forward counterparts, as the term “foreclosure” has a more nuanced meaning in the reverse mortgage space: In addition to cases in which homeowners failed to pay their taxes and insurance and actually defaulted on the loan, HECM foreclosures also can include scenarios in which the last surviving borrower died or moved away.
The death of the last surviving borrower is also the most common cause of reverse mortgages and foreclosures, according to a statement that a HUD spokesperson gave Huffington Post contributor Jack Guttentag last year.
Brian Sullivan, a HUD spokesman, told Politico that the observed foreclosure surge “probably” stemmed from new Federal Housing Administration guidance that requires lenders and servicers to expedite the tax-and-insurance default process.
Guttentag, along with National Reverse Mortgage Lenders Association president and CEO Peter Bell, addressed the foreclosure issue in the wake of Steven Mnuchin’s nomination to lead the Treasury Department. Mnuchin had previously been the chairman of OneWest Bank, parent company of the Financial Freedom reverse mortgage arm; between 2009 and 2014, Financial Freedom saw 16,200 HECM foreclosures.
The Financial Freedom portfolio — which was recently sold to an unnamed buyer — saw a 302% increase in foreclosures in 2016, according to the nonprofits’ FOIA data. The groups also pointed out that Joseph Otting, CEO of OneWest from 2010 to 2015, awaits confirmation as comptroller of the currency.
The California Reinvestment Coalition and Jacksonville Area Legal Aid called on HUD to ramp up oversight of servicers, provide more information about tax-and-insurance relief programs, and mandate regular independent audits for originators and servicers.
The groups also expressed support for a bill recently introduced by Rep. Maxine Waters, aimed at preventing senior reverse mortgage foreclosures.
Written by Alex Spanko