Imagine you’re a senior who has just lost your spouse. Soon after their funeral, while still grieving, you receive a letter in the mail, informing you that because your spouse passed away, you’re also going to lose your home to foreclosure.
Unfortunately, this horrible scenario is not imaginary- it has been happening to senior homeowners across the country due to reverse mortgages that were originated to only one spouse. If that “borrowing spouse” passed away, banks and servicers were foreclosing on the non-borrowing, surviving spouse, who in many cases was a younger wife. The idea that a surviving spouse could lose the family home is a scenario the vast majority of these couples never anticipated or understood when they originally looked at a reverse mortgage.
Nearly a dozen widows and their family members testified or submitted written testimony about their experiences with so-called “widow foreclosures” at a hearing of the Federal Reserve Board and the Office of the Comptroller of the Currency earlier this year. The hearing was intended to give consumers and the general public an opportunity to weigh in on the merits of the merger of OneWest, which owns a reverse mortgage servicer, Financial Freedom.
As part of our organization’s work on this merger (we were opposing it), we heard from a number of widows and advocates who had experienced the “widow foreclosure” problem first hand with Financial Freedom as their servicer. Based on these stories, we submitted a Freedom of Information Act (FOIA) request to HUD, asking for data about Financial Freedom’s record such as the number of complaints filed against it, and the number of foreclosures it had processed on widowed homeowners.
In recognition of the national implications of this problem, our request also asked about the total number of reverse mortgage foreclosures already processed, as well as how many potential “widow foreclosures” are in the pipeline. Since the U.S. Department of Housing and Urban Development is the regulator of this industry, our request also asked what steps HUD was taking to develop its new policy. Given the number of seniors potentially impacted by this problem, we believed the public would greatly benefit from knowing this information, and that it therefore met the “public policy” requirement for a FOIA fee waiver, which we also requested.
We were shocked when HUD responded that it was denying our fee waiver request. We appealed, citing the importance of the general public better understanding this problem, but HUD also denied that appeal. We are left to speculate whether HUD receives complaints about reverse mortgages, if so, how many complaints, how does it respond to those complaints, and does HUD use complaint data to inform its policymaking?
Around the same time as our FOIA request, HUD was crafting a new policy to address the “widow foreclosures” problems. This was not a voluntary move by HUD, rather, it was compelled to do so after being sued by AARP and the law firm of Mehri & Skalet. Based on this lawsuit, a federal judge had ordered HUD to create a new policy to help these homeowners.
In January of this year, HUD released the new policy, ostensibly designed to help widowed homeowners. However, according to an analysis by advocates who have worked with these homeowners, the new policy called for widowed homeowners to somehow obtain large lump sums of cash to qualify- something that would be virtually impossible for the majority of these homeowners. One recently widowed homeowner we spoke with was told she’d need to pay out over eighty thousand dollars to qualify. Keep in mind, reverse mortgages are often thought of as a last resort for seniors who don’t have many other financial resources.
A coalition of advocates came out against the new policy, and HUD rescinded it, but without offering any explanation about a replacement. Then, in June, HUD announced a new policy. The new policy has the potential to help a great number of these seniors who are at risk of foreclosure, but the important caveat is that it’s voluntary for reverse mortgage servicers- there’s not a requirement that they use it, only the option.
While this new policy could be helpful for homeowners, we believe HUD erred in denying our fee waiver request. Our request would help the public to better understand how these loans were impacting seniors- and how HUD was responding to this problem. Moreover, it would have informed Los Angeles residents (and bank regulators) about the track record of OneWest bank, and its subsidiary, Financial Freedom. Because women and seniors are more likely to be impacted by this problem, there are also fair housing concerns, an important concern for HUD as a regulator of this industry.
Last Wednesday, with pro bono assistance, we responded to the FOIA fee waiver denials by filing a lawsuit against HUD. Our hope is that this case will be resolved quickly, that the fee waiver will be granted, and that HUD will provide us this data expeditiously so that we’re able to share it with the public.
While this information will be too late to inform the conversation about the OneWest merger (the merger was conditionally approved earlier this year), it can help better inform the public about the problem of widow foreclosures- and how HUD is responding to it.
This is precisely what the Freedom of Information Act is designed to do- better inform the public about government operations.