The Federal Housing Administration could do a better job evaluating the performance of its reverse mortgage program and overseeing the companies that service loans, according to a General Accountability Office report that was discussed at this week’s congressional hearing.
The GAO said a growing percentage of HECMs insured by FHA have ended because borrowers defaulted on their loans. While death of the borrower is the most commonly reported reason why HECMs terminate, the percentage of terminations due to borrower defaults increased from two percent in fiscal year 2014 to 18 percent in fiscal year 2018.
“Most HECM defaults are due to borrowers not meeting occupancy requirements or failing to pay property charges, such as property taxes or homeowners’ insurance,” says the GAO. “Since 2015, FHA has allowed HECM servicers to put borrowers who are behind on property charges onto repayment plans to help prevent foreclosures, but as of fiscal year-end 2018, only about 22 percent of these borrowers had received this option.”
GAO listed nine recommendations for FHA to consider, among them:
- Improving the quality and accuracy of HECM termination data;
- Establishing and periodically reviewing and reporting on performance indicators for the HECM program and examining the impact of foreclosure prevention options in the forthcoming HECM program evaluation;
- Developing and implementing procedures for conducting on-site reviews of HECM servicers, including a risk-rating system for prioritizing and determining the frequency of reviews;
- Working with the Consumer Financial Protection Bureau to complete an agreement for sharing the results of CFPB examinations of HECM servicers with FHA; and
- Collecting and recording consumer inquiries and complaints in a manner that facilitates analysis of the type and frequency of the issues raised.