AGs Seek Consumer Protections for HECM Borrowers

AGs Seek Consumer Protections for HECM Borrowers

A coalition of attorneys general from 24 states, the District of Columbia and Puerto Rico submitted a letter to Housing Secretary Ben Carson on May 1 requesting additional protections for HECM borrowers during the COVID-19 emergency.

“We anticipate that many senior homeowners with Home Equity Conversion Mortgages insured by HUD will have trouble making required property tax and insurance payments during the current crisis, whether because of illness, loss of income or an inability to make these payments safely while avoiding unnecessary contact with the outside world,” says the letter. “These seniors must be protected from unnecessary foreclosures because, quite simply, they may have nowhere else safe to go given the nature of the COVID-19 public health crisis.”

In addition to the protections contained in Mortgagee Letter 2020-06 – which allow HECM borrowers to request an initial six-month delay in having their loan being called due and payable (with the option to request one additional six-month delay pending HUD approval) – the AGs urged HUD to implement the following recommendations:

  • Require reverse mortgage servicers to solicit borrowers for an Extension Period whenever a default occurs;
  • Allow servicers to recognize local property tax forbearance, deferral, repayment and forgiveness plans;
  • Automatically renew At-Risk Extensions (or allow the homeowner to self-certify);
  • Allow reverse mortgage servicers to add missed tax and insurance payments to the end of the reverse mortgage loan balance; and
  • Prepare now to extend these protections beyond 12 months, if needed.

Read the letter in its entirety.