A bill introduced in the US Congress is proposing reforms to the reverse mortgage program of the Department of Housing and Urban Development (HUD) in an effort prevent unfair foreclosures on seniors.
The bill, called Preventing Foreclosures on Seniors Act, proposes to require loss mitigation for Home Equity Conversion Mortgage (HECM) borrowers in default, as this is currently optional. Additionally, the bill seeks to require that non-borrowing spouses are treated as borrowing spouses for the purposes of loss mitigation, as they are currently ineligible.
The proposed legislation would also require mandatory assignment of HECM loans to HUD if there is an eligible non-borrowing spouse living in the home upon the death of the borrower, a practice that is currently optional and require mortgagees to provide prompt notice to a surviving non-borrowing spouse of their eligibility to remain in the property if they meet certain basic requirements, among other proposed reforms.
Rep. Maxine Waters (D-Calif.) proposed the bill, while Rep. Denny Heck (D-Wash.) was an original cosponsor. The bill is supported by the National Consumer Law Center (NCLC) and the California Reinvestment Coalition.
“This bill would provide much-needed protections for older borrowers with reverse mortgage loans,” said NCLC Staff Attorney Alys Cohen. “It would require lenders to give seniors a chance to stay in their homes by repaying back taxes and insurance when they can afford to do so. It also would protect spouses left off a reverse mortgage from needless foreclosure by requiring that eligible spouses be given the opportunity to remain in their home. These are common sense steps that would protect older borrowers and preserve the reverse mortgage program by making it work better.”