Mark Miller writes about how the industry and government are addressing reverse mortgage defaults in his latest Reuters column.
Barbara Stucki, vice president of home equity initiatives at the National Council on Aging, told Reuters that about five percent of the 550,000 loans outstanding are non-performing for failure to pay taxes and insurance.
Miller writes that the situation has been a political “hot potato” for the federal agencies involved, which include the Department of Housing and Urban Development, the Federal Housing Administration and Fannie Mae, which previously purchased the majority of HECM loans.
Peter Bell, President of the National Reverse Mortgage Lenders Association told Reuters that none of the agencies wanted to take the lead and clarify how to handle the defaults, so a backlog grew.
“For years, Fannie was the loan owner and HUD was the insurer,” he said. “The loan servicer would advance the taxes for the borrower, but at some point they’d go to HUD and ask for permission to call the loan. No one wanted to make that call, because it could lead to a foreclosure process. Ultimately, if the borrower doesn’t pay they’d have to move to [foreclosure.]”
