Foreclosures stemming from factors other than death are a byproduct of reverse mortgage loans in the United States territory of Puerto Rico, according to a report in Reverse Mortgage Daily. They’re taking place at a rate almost one-in-four between 2014 and 2018.
An investigative report published in USA Today showed Puerto Rico’s struggles with natural disasters, plummeting homes prices, and scant comprehension of the territory’s unique tax exception, have further magnified the issue there.
“An analysis by USA Today and the Centro de Periodismo Investigativo found waves of reverse mortgages headed to foreclosure in Puerto Rico for reasons other than death, the natural way the loans are supposed to end,” said the report. From 2014 to 2018, due to technical snafus, nearly one in four reverse mortgage loans faltered, according to the Government Accountability Office.
Based on reports from the news outlet, the Puerto Rico Office for Financial Institutions reported that tax defaults and insurance or occupancy issues, rather than the end of life, culminated in reverse mortgage foreclosures. That’s approaching 15% nationwide, according to USA Today’s analysis. The outlet reported that nearly 4,300 reverse mortgage loans of the island’s full 10,800 loans through the end of last year were originated by Monet House Inc., the region’s top lender.
In January, recent disasters such as an earthquake that month aside, Puerto Rico’s housing market rebounded. The seasonally adjusted purchase-only house price index on the island year-over-year as of Q3 2019 climbed 10.59% year-over-year as of Q3 2019. That said, there was a plummet of 2.66% in Q3 2019 in homes prices quarter over quarter.
While demand in Puerto Rico continues to spike, too, the island’s housing market—because of economic problems as a result of recent disasters remains vulnerable.
“I am concerned because Puerto Rico hasn't yet fully recovered from Hurricane Maria, and many of the homes on the island are designed for hurricanes and floods - they're basically built on stilts, which makes them very vulnerable to earthquakes,” said Leisha Delgado, Founder & CEO, Hello Solutions. Our experience from Maria tells us that there will be challenges coordinating assistance efforts, and communicating with people in parts of the island without power, so they may not know how to get aid, or know that help is on its way, she continued.
Lending a hand to the island’s recovery efforts, $8.2 billion in aid to Puerto Rico was released by the U.S. Department of Housing and Urban Development.
Money House originated 1,023 loans in the Caribbean region of the U.S. between fiscal years 2014 and 2018, according to HUD data, according to Reverse Mortgage Daily. Compared with other regions in the country, based on 2008 and 2009 federal loan data, higher service charges were associated with Money House loans, the report cited. A caveat, however, a Money House spokesperson told USA Today that as lenders and servicers “became more efficient,” those fees were stopped.