BOXER, SCHUMER: REVERSE MORTGAGE COMPANIES THREATENING HEIRS OF DECEASED HOMEOWNERS WITH FORECLOSURE UNLESS THEY PAY MORE THAN THEY ARE LEGALLY REQUIRED TO PAY - SENATORS CALL ON HUD TO ENFORCE THE RULES AND MAKE HEIRS AWARE OF THEIR RIGHTS TO AVOID GETT
BOXER, SCHUMER: REVERSE MORTGAGE COMPANIES THREATENING HEIRS OF DECEASED HOMEOWNERS WITH FORECLOSURE UNLESS THEY PAY MORE THAN THEY ARE LEGALLY REQUIRED TO PAY - SENATORS CALL ON HUD TO ENFORCE THE RULES AND MAKE HEIRS AWARE OF THEIR RIGHTS TO AVOID GETTING SCAMMED
A Recent Report Found that an Increasing Number of Families are Being Unfairly Targeted for Foreclosure After Inheriting a Reverse Mortgaged Home
Heirs of Deceased Loved Ones with a Reverse Mortgage Are Often Threatened with Foreclosure Unless They Pay Full Value of Reverse Mortgage, Which is Often Higher than Assessed Value of the Home - Legally, Heirs Are Actually Only Required to Pay 95% of Assessed Value
Citing the findings of a recent New York Times report, the Senators wrote that "an increasing number of heirs are facing foreclosure on their homes after receiving inaccurate and confusing information on their options following a reverse mortgage borrower's death."
When home values precipitously declined in the wake of the recent financial crisis, many families ended up owing more on their mortgage than their properties were worth. Under HUD rules, reverse mortgage borrowers or their heirs are supposed to be able to satisfy their loans in such cases by paying 95 percent of the home's current value. Instead, as the Times' reported, "reverse mortgage companies are increasingly threatening to foreclose unless heirs pay the mortgages in full."
The Senators asked Secretary Donovan to take action "to ensure heirs are accurately informed of this option and are not unnecessarily facing foreclosure at the same time they may be mourning the loss of a parent or other family member."
The Senators' full letter is below.
Dear Secretary Donovan:
We were disturbed to read in a
As you know, home values declined sharply during the recent financial crisis, and many borrowers, including those with reverse mortgages, found themselves owing more than their properties were worth. Under the U.S.
The failure on the part of the mortgage companies to offer the option of satisfying the loan by paying ninety-five percent of the home's appraised value unfairly penalizes a borrower's family members and heirs, who are unable to obtain refinancing to pay off the loan. Instead of keeping the home in the family, they could end up either facing foreclosure or being forced to sell the property to strangers, who still are allowed to purchase the property at ninety-five percent of value.
Some of the confusion appears to stem from a mortgagee letter HUD issued in 2008 that would have limited lenders' ability to accept less than the full mortgage balance as payment from family members or heirs. HUD rescinded that letter in 2011 and stated at the time that it would issue a replacement letter, but has yet to do so.
To avoid causing grieving family members additional anxiety during an already difficult time, we urge you to take the following steps:
1. Issue the promised letter, making clear that HUD's retraction of the 2008 guidance should be construed as reinstating the preexisting interpretation that a matured reverse mortgage loan can be extinguished by the mortgagor, the mortgagor's estate, or personal representative by paying 95 percent of the home's market value.
2. Develop a letter that servicers can send to a borrower's family members and heirs that clearly outlines options for settling the loan.
3. Enforce the existing rule and require that any servicer that fails to offer this option within the required time allow a family member or heir to pay the lower of 95 percent of the home's value at the time the loan became due or 95 percent of the home's value at the time the error was corrected.
We urge you to take the steps outlined above and any others necessary to ensure heirs are accurately informed of this option and are not unnecessarily facing foreclosure at the same time they may be mourning the loss of a parent or other family member.
Thank you for your prompt attention to this issue, and I look forward to your response.
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