The Consumer Finance Protection Bureau (CFPB) published today its “Snapshot of reverse mortgage complaints – December 2001 – December 2014“. Reverse mortgages are different from traditional mortgages in various ways. One of the most significant ways is that in a reverse mortgage the qualifiers are the person’s age and amount of equity in the home. In a reverse mortgage, the homeowner receives payments from the lender based on the amount of equity in the home. In the CFPB’s “Reverse Mortgages: Report to Congress“, the CFPB states that Reverse mortgages allow seniors to access the equity they have built up in their homes now, and defer payment of the loan until they die, sell, or move out of the home.” I am not a big fan of reverse mortgages, but I can see the benefits of a reverse mortgage in limited situations. Some key facts from the CFPB’s report are:
- the reverse mortgage market is 1% of the size of the traditional mortgage market;
- there will be likely an increase in reverse mortgages as the population ages;
- 74% of persons aged 55-64 own a home; and
- homeowners aged 62 and older hold a combined $3.84 trillion in equity in their homes according to the National Reverse Mortgage Lenders Association (NRMLA).
According to the CFPB’s report, the number one complaint (38% of the complaints) concerned problems when the homeowner seeks a loan modification or when the homeowner is in collections or foreclosure. The CFPB states that these complaints stem from confusion about loan terms and requirements such as the fact that over time the accrued interest on the loan will reduce the equity in the home.
One of the most troubling complaints concerns the younger spouse who is not on the reverse mortgage (the non-borrowing spouse). According to the report, consumers are being misled by loan originators and not told that if the older spouse passes away, the non-borrowing may lose the home. CFPB reports that HUD issues a letter, effective August 4, 2014, allowing for non-borrowing spouses who meet certain criteria to remain in the home after the death of the borrower spouse. However, the surviving non-borrowing spouse will not have receive any reverse mortgage payments.
Of course, a major part of the problem concerns loan servicers. This list should come as no surprise to all those out there in the world of foreclosure defense. Loan servicers are described as
- do not send out the required notifications;
- do not provide a clear process for repaying the reverse mortgage;
- incorrectly place consumers in default for failure to pay taxes; and
- fail to keep accurate records.
Loan servicers continue playing their dirty little tricks in order to manufacture defaults.