SEATTLE — A coalition of attorneys general, including Washington Attorney General Bob Ferguson, have asked the federal government to give clearer protections during the coronavirus pandemic to seniors with reverse mortgages who are at risk of foreclosure.
Reverse mortgages are typically home equity conversion mortgages that are insured by the U.S. Department of Housing and Urban Development. It can be a complex financial instrument, says Ferguson, but it's a tool that seniors have as a way to stay in their homes if they have challenges meeting a monthly payment. Most often, seniors do not have to make monthly mortgage payments, but instead, they pay recurring charges like property taxes and homeowner's insurance. They have to keep their homes in good condition as well.
Because HUD insures the loans it sets rules for the loan servicers to follow. And even though the agency implemented relief for reverse mortgage borrowers under the CARES Act, Ferguson says there should be additional steps to keep seniors in their homes.
"Folks with the reverse mortgages have certain protections to delay payments if they're having a hard time," said Ferguson. "But the problem is who knows if they have those rights? You have to be proactive and call somebody up. What we're asking is to put the burden on the servicer to call up the person with the reverse mortgage and explain your rights to you."
A coalition of bipartisan attorneys general sent a letter to HUD Secretary Ben Carson earlier this month, adding that they anticipate senior homeowners will have trouble paying property tax and insurance during the crisis.
The coalition also asks that servicers be allowed to recognize local property tax forbearance or forgiveness plans – ordinarily, such programs are forbidden in HECM contracts. It also asked that HUD waive its requirement that servicers submit renewal applications with supporting documentation proving they are at-risk for not renewing their extensions. Seniors have a hard time getting out during the crisis and might not be able to go to the doctor to get the documentation they need. And the coalition asked that servicers add missed payments to the end of the reverse mortgage loan.
Ferguson says he understands Congress had to act fast and potentially didn't contemplate the need for additional protections for seniors in reverse mortgages. Nonetheless, that's why a coalition of attorneys general is trying to daylight the issue for Congress and the administration.
"We don't want [seniors] to be losing their homes during this pandemic," said Ferguson. "We want to make sure they know what protections they have from current actions by Congress, but we also want to push Congress and the administration to take even additional steps to delay those property tax payments to delay the insurance payments."
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