As parts of the Bahamas and Southeastern U.S. are bearing the brunt of Hurricane Dorian, the Consumer Financial Protection Bureau (CFPB) has released a new guide for borrowers of Home Equity Conversion Mortgages (HECMs) who have been affected by natural disasters.
“Today we released a guide for older homeowners on how to meet their reverse mortgage (HECM) loan obligations while recovering from a hurricane, fire, flood or other natural disaster,” said Cora Hume of the Office for Older Americans at CFPB in an emailed announcement. “After a natural disaster, reverse mortgage borrowers may experience damage to their home, unexpected expenses, and a sudden loss of income. All these things may make it difficult for them to comply with the loan requirements, which could lead to foreclosure.”
The four page guide drafted in August uses straightforward language in an effort to instruct older homeowners how to meet the requirements of their reverse mortgage loan while simultaneously recovering from the affects of a natural disaster.
The guide is separated into five basic parts: three of those parts are devoted to the obligations the borrower must observe under the terms of a HECM loan, while another part offers tips for borrowers facing foreclosure and how to deal with it. The final part offers channels of possible assistance for borrowers in need of legal or counseling resources.
The first obligation for a HECM borrower is keeping the home in good repair, often an early casualty of a natural disaster. CFPB advises HECM borrowers to file a claim with their insurance company as soon as possible, while also visually documenting all of the damage that has affected the home. CFPB also recommends that the borrower notify his or her lender or servicer of home damage by certified mail while retaining a copy for themselves.
Both state emergency management offices and the Federal Emergency Management Agency (FEMA) should also be consulted, according to CFPB.
The second obligation is for the borrower to occupy the home as his or her principal residence, which can also be complicated by damage that may have been inflicted on the property. If a borrower is not able to occupy the home, CFPB again recommends written notification to the lender or servicer by certified mail that the borrower intends to return to the home when it is safe to do so. Up-to-date contact information, including a forwarding address and any changes in phone number should also be provided.
The third obligation is for the borrower to pay any property charges on time, such as taxes and homeowner’s insurance. If the onset of a natural disaster causes a disruption or delay in a borrower’s ability to meet this obligation, CFPB encourages checking with the borrower’s local tax authority to see if tax filing deadlines can be delayed or if installment plans can be implemented.
If a payment is or has already been missed, CFPB recommends that the borrower get in touch with his or her lender or servicer who may be able to pay the affected borrower’s property charges using money from a monthly loan payout or line of credit.
To round out the guide, CFPB offers specific tips for a borrower to engage with his or her insurance company, including in scenarios where a borrower’s policy either covers or denies coverage. Borrowers affected by natural disasters are encouraged to aggressively pursue remedies related to their properties, and if coverage is denied then a borrower is well within their rights to ask for specific reasons for denial in writing. If a borrower believes they have wrongly been denied coverage, then CFPB encourages the affected borrower to seek out the advice of an attorney.
Tips for avoiding home repair scams are also included in the document authored by CFPB, since disaster fraud is a serious enough issue that it led the U.S. Department of Justice to establish the National Center for Disaster Fraud (NCDF) in the wake of Hurricane Katrina in 2005.
Seniors are encouraged by CFPB to avoid door-to-door contractors that pressure on-the-spot decisions concerning home repair, along with verifying that written documentation and verbal agreements match.
The full CFPB guide for reverse mortgage borrowers affected by natural disasters can be downloaded for free from the Government Publishing Office, which also offers free hard copies designed for clients, financial caregivers, and “anyone else who could benefit from the information,” the CFPB says.