Monday, January 23, 2017

Recently Revised HUD Policy On Reverse Mortgages To Protect Surviving Widowed Spouses From Foreclosure Not Working As Hoped, Say Housing, Senior Rights Advocates

In Northern California, the East Bay Times reports:
  • Reverse mortgages, which are typically used to supplement retirement income, allow homeowners to relinquish equity in their home in exchange for regular payments. In the past, just one spouse was often listed on the reverse mortgage application as a way of qualifying for a higher amount or in instances where the other spouse was not yet 62.

    But there was a downside many homeowners didn’t anticipate: If the mortgage wasn’t in someone’s name, the remaining occupant had to either pay back the loan or face foreclosure.

    In 2015, following intense pressure from lawmakers and lawsuits, the U.S. Department of Housing and Urban Development updated its policy on reverse mortgages in response to a federal court ruling to allow the surviving partner to remain in the home and for HUD to take over the loan for the remainder of the surviving spouse’s life. But housing and senior rights advocates say it hasn’t exactly worked out that way.

    “Whether the breakdown is that there aren’t adequate rules, that they are not enforcing the rules or simply failing to do everything within their authority to help seniors stay in their homes, the hardship is real and needs to be fixed,” said Kevin Stein, deputy director of the California Reinvestment Coalition, a nonprofit housing rights and advocacy group based in San Francisco. “These people have recently experienced the death of a loved one, only to have the unexpected loss of their housing. It’s the worst possible double whammy.”

    In an attempt to learn whether the new rule was helping seniors, the California Reinvestment Coalition filed a Freedom of Information Act request last year asking HUD how many people in the country had applied for something known as a “Mortgagee Optional Election Assignment” seeking to remain in a home. It was shocked to learn that just 100 people had sought the benefit and only one-third were approved.

    “What this says to us is that either HUD and/or the servicers are not publicizing this policy, a policy they were essentially forced to do as a result of lawsuits,” Stein said.
For more, see Reverse mortgages costing some surviving spouses their homes (New law was supposed to protect older homeowners. Now, advocates aren’t so sure it’s actually working).