The Consumer Financial Protection Bureau (CFPB) recently revealed issues confronting reverse mortgages borrowers in a wider report highlighting older Americans’ consumer product complaints. To date, the Bureau has received 2,800 reverse mortgage complaints.
Reverse Mortgage Complaints
In its May 2017 Complaint Report, the Bureau noted that older consumers with reverse mortgages were reported to be at risk of foreclosure when they were unable to pay their property taxes and homeowners insurance premiums on time.
Home Equity Conversion Mortgages, which make the bulk of today’s reverse mortgages, require homeowner borrowers to be current on their property taxes and homeowners insurance premiums. Otherwise, they could face loan defaults or foreclosure.
Borrowers told the CFPB that their loan servicers extended repayment plans to cure their delinquency. Nevertheless some consumers continued to face financial problems and were unable to meet such repayment terms. Other consumers were reportedly removed from their repayment agreement without being properly notified.
Beginning 2015, the FHA has required lenders to conduct a financial assessment to measure the borrower’s ability to pay taxes and insurance. States like Illinois and California also have assistance programs for reverse mortgage borrowers with delinquent taxes and insurance premiums.
Loan Servicing Delays and Foreclosures
Older consumers recounted to the CFPB their experiences with their loan servicers with respect to the process of retaining the home after the death of the borrower.
For instance, some non-borrowing spouses said that they have submitted to the loan servicers requests to remain in the home after the death of their borrower spouse but the servicers were slow to acknowledge such requests and repeatedly asked for the same documents a number of times.
“Sometimes these delays resulted in foreclosures being initiated. Successors-in-interest stated they were not given an opportunity to purchase the property or to market and sell the property after providing documentation of proof to act on behalf of the borrower’s estate. Successors in interest also reported difficulties communicating with servicers and experienced delays in navigating the process, which sometimes resulted in the initiation of foreclosure proceedings,” the CFPB wrote in the report.
The CFPB’s May 2017 Complaint Report somehow echoes issues raised by reverse mortgage borrowers and heirs from December 2011 to 2014 and compiled in 2015. In this 2015 snapshot, the Bureau grouped the reverse mortgage complaints received in these categories:
|38%||“Problems when unable to pay” (Loan modification, collection, foreclosure)|
|32%||“Making payments” (Loan servicing, payments, escrow accounts)|
|18%||“Applying for the loan” (Application, originator, mortgage broker)|
|10%||“Signing the agreement” (Settlement process and costs)|
|3%||“Receiving a credit offer” (Credit decisions and underwriting)|
Previous complaints resulted in meaningful policy changes to the HECM program such as the financial assessment requirement.