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Waters Introduces Legislation to Help Prevent Unfair Foreclosures on Seniors with HUD Reverse Mortgages

Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, introduced the Preventing Foreclosures on Seniors Act, a bill to make reforms to the U.S. Department of Housing and Urban Development’s (HUD’s) reverse mortgage program to help prevent unfair foreclosures on seniors. HUD’s Home Equity Conversion Mortgages (HECM) program allows seniors to take out reverse mortgages, which convert a portion of their home equity into cash to supplement their income in retirement.

“Unfair foreclosures on seniors continue to be a problem in the Department of Housing and Urban Development’s reverse mortgage program. This bill makes key changes to help seniors who are vulnerable to foreclosure under the current program,” said Ranking Member Waters. “It is critical that we take every possible step to ensure that seniors who take out reverse mortgages, and particularly their surviving spouses, do not unfairly lose their homes.”

Congressman Denny Heck (D-WA) is an original cosponsor on the bill.

The bill is supported by the National Consumer Law Center (NCLC) (on behalf of its low-income clients) and the California Reinvestment Coalition (CRC).

“This bill would provide much needed protections for older borrowers with reverse mortgage loans. 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,” said Alys Cohen, Staff Attorney for the National Consumer Law Center. “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.”

“This new bill by Ranking Member Waters is a practical and effective way to ensure that widows and widowers are able to live out the rest of their lives in their homes, consistent with what the majority of these seniors were told when they first obtained a reverse mortgage,” said Paulina Gonzalez, Executive Director of the California Reinvestment Coalition.

The bill makes reforms to HUD’s Home Equity Conversion Mortgages (HECM) program to:

  • Require loss mitigation for HECM borrowers in default (currently it is optional).
  • Require that non-borrowing spouses are treated as borrowing spouses for the purposes of loss mitigation (currently they are ineligible).
  • 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 (currently it is optional).
  • 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.
  • Prevent foreclosures on non-borrowing spouses once the loan is assigned to HUD unless they fail to meet certain basic requirements.
  • Grant the Secretary of HUD authority to reduce or deny insurance benefits to any mortgagee who fails to comply with loss mitigation requirements.
  • Extend the deadline by which non-borrowing spouses must obtain the proper paperwork to prove their eligibility.
  • Require HUD to consult with the Consumer Protection Financial Bureau (CFPB) on matters of consumer protection to ensure that HUD rules are more sensitive to these issues in the future.

For more information, view the legislation and a one pager.


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