The city of Philadelphia is set to consider new legislation that would “prevent the spread of reverse mortgage foreclosures” in the city by “closing a loophole” in the city’s laws that some lenders allegedly exploit to foreclose on reverse mortgage borrowers.
The bill, introduced this week by Philadelphia City Councilwoman Cherelle Parker, stipulates that a reverse mortgage borrower who is in a payment agreement for real estate taxes on their home cannot be considered delinquent on those real estate taxes.
A reverse mortgage allows a homeowner, age 62 or older, to access the equity in their home via a loan, which does not need to be repaid until the last borrower dies or moves from the home.
During that period, the borrowers are required to live in the home, maintain the home, and pay their real estate taxes and homeowner’s insurance.
In a statement, Parker said that reverse mortgages have been a “scourge” in some of the city’s neighborhoods thanks to the “unscrupulous practices” of some lenders.
“I know all too well the scourge that reverse mortgages have been on certain neighborhoods in the city. Unfortunately, it has been quite common for reverse mortgage lenders to swoop in and pay off any remaining real estate tax balance of homeowners even if they are in a payment plan and not delinquent, and then use this as an impetus to foreclose on these homeowners,” Parker said.
“It is my hope that these new regulations and my accompanying legislation will protect homeowners by finally putting an end to some of the more unscrupulous practices we have seen from reverse mortgage lenders,” Parker added.
The rule would match new Philadelphia Department of Revenue regulations that took effect recently.
“I want to thank housing advocates, such as Community Legal Services, for first raising this issue, and commend Revenue Commissioner Frank Breslin and his team for changing the regulations,” Parker concluded.