An assistance program in the state of Oregon is on track to assist the majority of the state’s defaulted reverse mortgage borrowers just in time for a final round of applications, which are expected to begin in Spring 2020.
The Oregon Homeownership Stabilization Initiative (OHSI)’s reverse mortgage benefit program is designed to assist homeowners in getting out of default on their reverse mortgages, offering up to $40,000 in payments to individual borrowers to bring affected seniors up-to-date on taxes and insurance in order to remain in their homes, Carmel Charland and Nicole Stoenner of OHSI tell RMD in a phone interview.
Some qualifying borrowers can also receive as many as 24 months of future property tax and homeowner’s insurance payments direct from OHSI.
OHSI works directly with the reverse mortgage servicer to bring clients current on their obligations under the terms of a Home Equity Conversion Mortgage (HECM).
In the wake of the 2008 financial crisis, the U.S. Department of the Treasury disbursed the Hardest Hit Fund, designed to provide targeted aid to states hit hardest by the subprime mortgage crisis that started in 2007. As a result, OHSI was established in 2010, and started administering foreclosure assistance programs the following year. After five years of observations and taking into account changes in the state’s property tax deferral programs, OHSI simed to expand the scope of its assistance programs.
“By the time we got the additional funding and were looking at how to utilize this money in 2016, we took a look back at where we had been,” says Carmel Charland, OHSI administrator.“ At that point in time, the real estate climate had really changed in Oregon, so we wanted to look at who had not really been served by the previous programs that we had run.”
One of those underserved segments was people with reverse mortgage loans who had received default notices. Looking at neighboring states that had developed similar programs helped guide Oregon to the topic of reverse mortgage defaults, which also led to partnerships with other state government agencies that assisted the state of Oregon in developing its own program.
“We were able to look at our sister Hardest Hit Fund states and take some good examples,” Charland says. “I think the first state to do a reverse mortgage program was Florida, and then California ran with it, so we really partnered with California a lot in developing [our own reverse mortgage assistance program].”
Since reverse mortgage borrowers fell under the umbrella of previously under-served people in the state assistance program, OHSI identified a need worthy of implementation. This also led to direct support from the federal government.
“As we researched this we got further support from the Federal Housing Administration (FHA), in that there are over 300 HECM reverse mortgages in the state of Oregon that were in default in 2016,” Charland describes.
HECM default assistance
The one-time benefit for those who avail themselves of the program can be extended in the form of a second payment the program makes to the loan servicer to keep the borrower current for up to two years, Charland explains.
“[Beneficiaries] get a one-time benefit to bring them current and out of default, but once we receive confirmation from the servicer that their loan has been reinstated, then we make a second payment that is equivalent to the next 24 months’ worth of taxes and insurance, and potentially homeowner application dues,” she says. “And then, the servicer puts that in a set-aside account to be used as needed over the next 24 months.”
That additional payment for taxes and insurance is designed to help give the affected homeowner ample time to put finances in order to arrange for a period after which the program’s assistance fund is exhausted. The 300 observed HECM delinquencies in 2016 is believed to be attributable to the changes in Oregon’s tax deferral practices, Charland says.
“There were some changes and shifts and I’m not familiar with all that took place, but it impacted people who thought they had deferral but then no longer had one,” she says. “They were kicked off or [deferrals were made] temporarily unavailable. So, that caused a lot of these delinquencies.”
While OHSI didn’t have a record determining exactly how many HECM reverse mortgages existed in the state at the time of the interview, its internal statistics have led the organization to believe that the majority of those borrowers that have applied for reverse mortgage default assistance have already been, or are currently in the process of being served, as the program identified 300 HECM delinquencies in 2016.
“Currently in the state we’ve received 301 applications,” says Nicole Stoenner, legislative and communications coordinator at OHSI. “So, another component might be that we’ve really addressed the need [for reverse mortgage assistance] and spoken directly to the population of folks with reverse mortgages that have been FHA-approved.”
The amount of money in total spent on the program is also relatively modest, but has managed to serve nearly all of those who have submitted applications thus far, says Charland.
“To date, we’ve spent $436,000 and $638,000 on this program, and that’s serving 275 approved applications,” she says.
Considering that many of the affected senior clients are limited in their technological skills and have a tendency to be geographically isolated, Charland says, the reverse mortgage assistance program can take applicants over the phone in their office which is not usually required of the organization’s other assistance programs.
That greater level of more personalized, tailored assistance makes OHSI potentially more involved with reverse mortgage clients when compared to other clients they serve. That also leads those in OHSI to become familiar with the scenarios that necessitate assistance in the first place.
“We really get to know these people,” Charland describes. “The most common scenario is that they are overwhelmed by a health crisis, a major medical event that just blows apart their financial plans. We hear that all the time. The other thing that’s really common is financial abuse either from somebody in their life, or some kind of scam. They’re the victims of an online or phone scam, so it’s definitely been a different experience to work with this population.”
The organization has even created a new training program to identify specific scenarios in which seniors are taken advantage of.
“We’ve now done red flag training for elder abuse, because this is sometimes how it comes to light: when they apply to our program,” Charland says.
Getting the word out, winding down
While some of the efforts in the reverse mortgage assistance program have revolved around getting the word out about to borrowers and reverse mortgage servicers, the program isn’t permanent and will be winding down its operations soon. Until then, though, OHSI is working diligently with partners in both government and industry to ensure that as many loans as possible don’t go into default.
“Champion Mortgage, which is one of the largest providers, has some really amazing staff that really took the initiative and helped coordinate some events here in Oregon that we partnered with, and they had a really big influence on getting people into the program,” Charland says.
Champion has since ceased its reverse mortgage operations in Oregon specifically, but as similar programs in other states have run their course, some servicers may not be aware that the Oregon program is still operational.
“Another consideration I just now thought of is that California has stopped taking applications for all their programs last year,” Charland says. “So, it’s entirely possible that some servicers don’t even understand that we’re still open and taking applications.”
Still, operations in the state of Oregon are winding down for this program, and the program will only be taking new applications for consideration for the next six months.
“Our plan is to use all of the federal funds until they run out, and now our estimate is that Spring 2020 will be about the date that we’re going to run out of those funds,” said Stoenner.
The difference the program makes
Although only running for a limited time, those who have worked in the reverse mortgage assistance program have seen its benefits make a demonstrable difference in the lives of beneficiaries, and being brought current on the terms of their loans helps offer a peace of mind that can be difficult to come by for people living on a fixed income, Charland says.
“For the folks themselves, it makes a huge difference because they really are looking at foreclosure, and because of being brought current and having that buffer timeline, it really enables them to regroup and find a way forward, either by adjusting their budget, finding other resources, or finding time to sell and discuss with their families what the best scenario is for them,” she says. “It provides them the time they need to have the best outcome.”
This is even more important for the locality, since Oregon’s state housing finance agency has noted a troubling increase in the rate of senior homelessness.
“One of the things we’re noticing and a trend we’re seeing is an increase in seniors that are facing homelessness, and we see any sort of housing stabilization program as an effort to prevent homelessness, and [the reverse mortgage assistance program] certainly falls in line with those efforts,” adds Stoenner.