California AG Becerra Urges Secretary Ben Carson to Further Protect Senior Homeowners

(STL.News) – California Attorney General Xavier Becerra today, as part of a coalition of 26 attorneys general, sent a letter to U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson requesting further action to protect senior homeowners during the COVID-19 public health emergency.  In today’s letter, the coalition argues that action is necessary so that senior homeowners who have a HUD-insured Home Equity Conversion Mortgage (HECM) – also known as a “reverse mortgage” – are given a fair opportunity to retain their home amidst the public health emergency.

“Our nation’s historic public health and economic crisis not only disproportionally affects the well-being of our seniors, it risks their ability to afford their homes,” said Attorney General Xavier Becerra.  “We’re urging HUD Secretary Ben Carson to put additional protections in place for adults in their mid-60’s and older who have reverse mortgages.  As the pandemic continues, so will our efforts to safeguard Americans whose wealth and financial well-being are most at risk.”

It is anticipated that many homeowners with reverse mortgages will have trouble making required property tax and insurance payments during the COVID-19 public health emergency.  It is therefore essential that seniors are protected from unnecessary foreclosures, as they may not have anywhere else safe to go given the current crisis.  In today’s letter, the coalition applauds HUD’s initial response to protect senior citizens with reverse mortgages, but argues that protections for seniors must continue to evolve and expand to meet the impact of the public health emergency.

In the letter, the coalition urges HUD to implement the following recommendations:

  • Require reverse mortgage servicers to solicit borrowers for an Extension Period whenever a default occurs.  Mortgagee Letter 2020-06 requires servicers to delay calling a loan due and payable “upon request of the Borrower.”  However, many reverse mortgage borrowers may not be in regular contact with their servicer or know to make this request.  Therefore, servicers should be required to contact their customers and advise them of the availability of an extension period when a default occurs.  HUD should advise servicers to make repeated efforts to contact homeowners who are difficult to reach, and to use plain language notices to explain the benefits of forbearance relief to any borrower who has a COVID-19-related hardship
  • Allow servicers to recognize local property tax forbearance, deferral, repayment or forgiveness plans.  Ordinarily, such programs are forbidden by HECM contracts and rules if they create a priority lien over the HECM.  However, additional flexibility is needed to help local governments protect their senior homeowners through this crisis.  Servicers should also give borrowers additional time to seek local property tax relief before making delinquent payments
  • Automatically renew At-Risk Extensions (or allow the homeowner to self-certify).  HUD should waive its requirement that servicers submit renewal applications with supporting documentation for At-Risk Extensions for the duration of this crisis.  HUD should not require senior citizens to seek unnecessary documentation or visits with their physicians when doing so may pose a significant health risk to the borrower
  • Allow reverse mortgage servicers to add missed tax and insurance payments to the end of the reverse mortgage loan balance. Some homeowners with a federally-backed “forward mortgage” loan will be able to defer forborne payments to the end of their loan term under emergency servicing guidelines for Federal Housing Administration-insured or Federal Finance Housing Agency-backed mortgages. Reverse mortgage holders need similar relief.  Therefore, HUD should allow servicers to add missed property tax and homeowner insurance payments to the end of the reverse mortgage loan balance
  • Prepare now to extend these protections beyond 12 months if needed.  Because seniors are at higher risk from COVID-19, there is a possibility that even after the peak of the virus subsides, seniors’ activities will continue to be restricted until there is a vaccine.  HUD should start preparing now for this possibility and consider ways to extend the above requested actions beyond the CARES Act’s 12-month protection