Maine Law Would Use Reverse Mortgage as Anti-Foreclosure Option

A bill before Maine lawmakers would require local governments to tell seniors facing foreclosure about the potential of taking out a reverse mortgage.

The proposed legislation — titled “An Act to Protect the Elderly from Tax Lien Foreclosures” — explicitly directs local municipalities to tell homeowners in property-tax trouble about “the option of seeking a reverse mortgage.”

The concept been something of a passion project for Gov. Paul LePage, who first discussed the potential of troubled homeowners using reverse mortgages last February. LePage cited the story of an Albion, Maine couple who lost their home to foreclosure in 2015 due to the non-payment of property taxes.

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“It is unethical and immoral to take away a senior citizen’s home,” the governor, a Republican, said in his 2017 State of the State address. “They lose all the equity they built up during their lives. They end up on the street.”

Now that the proposal is under consideration by state’s lawmakers, the governor has continued to express support for reverse mortgages as a possible solution, seemingly suggesting to CentralMaine.com that the town itself could assist in arranging a loan.

“The town never loses money because once there’s a lien on the house, it can’t be sold until the taxes are paid,” he told the website, which includes content from the Kennebec Journal and the Morning Sentinel of Waterville, Maine.

The proposal has faced opposition on multiple fronts, including from critics who say the bill could encourage older residents to actively avoid their responsibilities as homeowners.

“There is concern that if someone wanted to game the system, they could just stop paying their property taxes,” Christopher Saunders, a Maine town manager, told the Mount Desert Islander.

Written by Alex Spanko

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  • Questions arise. What about a default in light of financial assessment? Would a HECM net of a LESA be sufficient to pay off all liens plus a year of prepaid taxes and insurance? Perhaps for some but very doubtful in the majority of these situations. the defaults (normally more than one) could stop the origination process all together.

  • I have been saying this for years– before a seniors house is foreclosed– check ALL available options– with the Reverse Mortgage being just one of those options– maybe if more elected officials would think things through like this governor, then we would have less foreclosures and disruptions on seniors.

  • This consideration bill before Maine lawmakers is confusing! Sure, a reverse mortgage could be a good solution, not only that, if it was in a form of a bill sponsored by a state, that sure ads credibility to our product!

    However, a senior facing foreclosure may not even qualify for a HECM today, especially if they have many late pays that first year?

    What gives me the most kick out of this is the part that says:
    – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
    “The town never loses money because once there’s a lien on the house,it can’t be sold until the taxes are paid,” he told the website, which includes content from the Kennebec Journal and the Morning Sentinel of Waterville, Main!

    The proposal has faced opposition on multiple fronts, including from
    critics who say the bill could encourage older residents to actively
    avoid their responsibilities as homeowners.

    There is concern that if someone wanted to game the system, they
    could just stop paying their property taxes,” Christopher Saunders, a Maine town manager, told the Mount Desert Islander”.
    – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

    Now this is brilliant! Read this in detail what and how this town looks at this? First off, the town, if they acted as the investor on the HECM, which that is what they are alluding to in the first paragraph, they are stuck with all the non-paid taxes on the property until they sell it. They also need to keep the property up and pay for the insurance on it! Not to good of a deal for the town as far as I am concerned.

    What really gets me is the last part, Christopher Saunders is right in what he is saying but the borrower is NOT really gaming the system. The borrowers are going to be foreclosed on in the end, so what did they gain? Absolutely nothing!

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

      • George,

        This is an actual bill before the Maine Lawmakers, which could become a reality. It is very confusing to me.This is why I broke it out the way I did and asked the questions I did.

        The way I am interpreting this is that municipalities with in the state of Maine could act as the lender in making reverse mortgages to qualified seniors. I see this as a major problem. I see this as a way they think they can head off foreclosures by aiding the borrower with tier taxes and insurance delinquencies. I may be wrong my friend.

        I hope I did not confuse you even more?

        John

  • Sadly, this well meaning idea is not based on fact. Unfortunately, it reflects the broad lack of understanding of the HECM in it’s present incarnation. Hopefully, a seasoned local HECM originator can help educate the local politicians so a well reasoned option can be offered which includes HUD Loss Mitigation Housing Counseling FBO all concerned.

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