U.S. Representative Maxine Waters (D-California) has written a letter to Department of Housing and Urban Development (HUD) Secretary Julián Castro asking for relief and more transparency for seniors participating in HUD's Home Equity Conversion Program (HECM).
At the center of the issue is the fate of surviving non-borrowing spouses upon the death of the last remaining note holder listed on the mortgage for HECM participants. In late April, the Federal Housing Administration (FHA) has issued a memo announcing the rescinding of a mortgagee letter written in January that would have allowed reverse mortgage lenders the option of delaying foreclosure proceedings on surviving non-borrowing spouses.
In an announcement regarding the letter to Castro, Waters said that many senior citizens have faced foreclosure or will face foreclosure due to "fraudulent lending practices" on the part of lenders surrounding HUD's previous protocol for the HECM program. Until recently, the age of the youngest borrower was used in calculating the payout on the reverse mortgage, which Waters said created a "perverse incentive" for the lenders to remove the younger borrower from the mortgage title. Waters said lenders deceived borrowers in many cases about the consequences of removing the younger borrower from the title, and many non-borrowing spouses were foreclosed on as a result.
Waters told the HUD Secretary in her letter that while the Department has taken a number of steps to address the issue, she believes that HUD "has fallen short of providing meaningful relief or transparency in its decision-making process."
As a result of this, she suggested that HUD revisit the issue in order to make some changes.
"[F]irst, I urge the Department to carefully study this issue, and recalibrate the Department’s response based on the concerns articulated in this letter," Waters wrote. "Secondly, I urge you to share the data requested herein with my office so that Congress and the public can better understand the scope of the challenges facing impacted senior homeowners."
Waters said she was especially concerned about non-borrowing spouses with HECM loans that were originated prior to August 4, 2014, saying there is a "lack of relief" provided to those affected and that HUD showed a "lack of transparency" in its decision-making process.
"I urge you to reconsider the limited scope of relief that HUD has offered thus far in response to the concerns raised by senior borrowers and advocates working on their behalf," Waters said. "While I understand the tension created by the need to balance the fiscal condition of the MMIF (Mutual Mortgage Insurance Fund), and to protect borrowers who have been victimized by unfair lending tactics, I hope that HUD will do everything in its power to provide much needed relief to these senior citizens."
A spokesperson for HUD told DS News in an email, "we’ve received Congresswoman Waters’ letter and will be responding to her concerns shortly."
To read the full text of Waters' letter, click here.