San Francisco-based advocacy group California Reinvestment Coalition (CRC) has asked HUD to impose a moratorium on home equity conversion mortgage (HECM, or reverse mortgage) foreclosures by CIT Group and its subsidiary, Financial Freedom.
CRC requested the moratorium based on new data it obtained from HUD in the form of a fact sheet which shows that CIT Group/Financial Freedom were responsible for 39 percent of the 41,237 reverse mortgage foreclosures in the United States since April 2009 despite having an estimated market share of only 17 percent in the reverse mortgage market.
Many of the reverse mortgage foreclosures that have occurred are “widow foreclosures,” or foreclosures that occur after the death of a non-borrowing spouse. These foreclosures are allowed to happen because some reverse mortgage originators name only the borrower on the reverse mortgage, which later allows the servicers to foreclose on the non-borrowing spouse. Many of the foreclosed-on non-borrowing spouses are seniors.
“CRC was contacted by a number of widowed homeowners and other heirs who shared disturbing stories about Financial Freedom,” said Kevin Stein, associate director at CRC. “Using a FOIA (Freedom of Information Act) request, we asked Financial Freedom’s primary regulator, HUD, about the total number of foreclosures it had completed, and the number of complaints HUD had received against Financial Freedom.”
Stein said the new data they obtained from HUD on reverse mortgages provides a “red flag that something is amiss” at Financial Freedom.
“This builds on the troubling consumer stories shared with us about Financial Freedom and CIT Group disclosing it had received subpoenas about Financial Freedom from HUD’s OIG (Office of Inspector General),” Stein said.
Maeve Elise Brown, executive director at Housing and Economic Rights Advocates, added, “This newly uncovered data about Financial Freedom's outsized role in HECM foreclosures is troubling, and suggests the need for a thorough and transparent investigation.”
The CRC originally made the FOIA request in November 2014 to obtain more information on HUD’s oversight of the reverse mortgage industry, such as the number of complaints against Financial Freedom. The CRC said that it was told that HUD could not fully comply with the request because HUD estimated it would take 120 years to compile all the information they asked for.
“It’s deeply concerning from a consumer protection standpoint when the main regulator for an industry tells you that because of their outdated technology, it will take them 120 years to compile complaint data about one of the companies they’re supposed be regulating,” Stein said. “If HUD lacks the ability to systematically access, analyze, and respond to consumer complaint data, how can it effectively regulate this industry, and individual companies? This is important information for identifying problematic practices and bad actors. In comparison, anybody with an internet connection can use the CFPB’s complaint database, and the CFPB routinely publishes public reports about the complaints it receives.”
Neither HUD nor CIT Group immediately responded to requests for comment on the CRC's bid for a moratorium on reverse mortgage foreclosures.
Click here to view the fact sheet on the FOIA request.