Archive for June, 2014

Almost HECM NBS Breakthrough

Monday, June 30th, 2014



There is good and bad news in the long-running HECM NBS legal tussle between HUD and non-borrowing spouses (NBS) of dead Hecm borrowers. It is almost a breakthrough.

After arguing that it has “no legal authority” to accept assignment of NBS Hecms twenty-one days before in a court filing in the Bennett case, HUD has suddenly found that “the Secretary does have discretion to accept an assignment upon request of a Mortgagee in exchange for claim payment” in a June 24th court paper in the Plunkett class action NBS case.

The technical name for the assignment is “Mortgagee Optional Election,” or MOE. Why the HUD about-face? That is the subject of another post. It is enough to say that HUD has legal authority to solve the wrenching human, legal, and financial problems its bad regulations have created for NBS and lenders. But that is where the good news end.

In other to qualify for MOE, HUD “wisely” erected some hurdles it is calling, yes, “disqualifying factors,” that lenders and NBS must jump through. Never mind these factors are retroactive in a unique situation that HUD’s own bad regulations and negligence created, never mind that some of these factors are silly, never mind that some of these factors are guaranteed to push many seniors into foreclosures and many lenders into endless litigation. It is what some lawyers would call “abuse of discretion.”

Some of HUD’s conditions of assignment are fair and reasonable. For example, to qualify for assignment, the:

  1. NBS must have been married to the dead borrower at the time of the HECM’s origination and remained married throughout the borrower’s life;
  2. NBS has title to property or legal right to remain in the property (marriage confers legal right even where many where removed from title, as HUD itself once advised lenders through a mortgagee letter);
  3. NBS must ensure that all obligations of the dead borrower are met;
  4. NBS must agree that they cannot get cash from the HECM;
  5. NBS must not allow the HECM to go into default for reasons such as taxes, insurance, and maintenance.

MOE is a potential breakthrough in the NBS saga. HUD needs to stop its silly legal maneuvers and solve the existing NBS problems in good faith once and for all.


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HUD’s Dollar-foolish HECM NBS Stand

Thursday, June 26th, 2014



HUD says it has “no legal authority” to help existing non-borrowing spouses (NBS) endangered by its former NBS policies in Bennett case. In response, the Bennett plaintiffs filed a new lawsuit June 16th challenging HUD’s decision and demanding a jury trial.

If HUD does not have “legal authority” to clean up its NBS mess (a dubious argument given its broad powers under Subsection 255(i) of the National Housing Act ), what about its ethical authority as a federal agency charged with protecting seniors in the HECM program? What about its moral authority as a federal agency with broad regulatory sway over the nation’s housing industry? As a department of the federal government, what about its guardian authority to do no harm to the neediest and the most vulnerable in society?

Technically called “Determination on Remand” (and filed on June 4th), the decision may have been calculated to win a legal battle, but it could cost HUD and the reverse mortgage industry the war. And here is why:

a) Foreclosures and displacements of non-borrowing spouses across the country could bring a fair amount of publicity to lenders, reverse mortgages, and HUD; it could also bring some VA-type scrutiny to the HECM program and its administrator;

b) As the new lawsuit suggests, HUD can expect more lawsuits where its regulatory laundry could come before juries and the public;

c) With allegations of fraud and misrepresentation in loan origination dogging most NBS cases, lenders (thanks to HUD) can expect more litigation in state courts as multiple foreclosure processes move along;

d) The legally-flawed interpretation of a HECM homeowner at the heart of the problem shaped NBS policy for more than 25 years, and much  damage was done; damage cannot be limited to two plaintiffs in the Bennett case, as we can see from the emerging Plunkett class action;

e) Besides NBS facing foreclosures and displacements, many spouses of HECM borrowers are expecting the same fate as soon as their borrowing spouses are buried; for a product that is supposed to bring peace-of-mind in the recreative years of life, HECM is being associated with worry and with nightmares; here is a sample email (edited) from a non-borrowing spouse in Atlanta, Georgia:

My husband took out a reverse mortgage in 2012 and I am a non- borrowing spouse.  I signed the paper acknowledging that if my husband dies before me, the mortgage is due immediately.  In other words I relinquished the rights to the property, was taken off the title, etc.  Since I was only a few years away from being 62, we did not see a problem, as I was told, I could get back on the title and do another reverse mortgage.  I have inquired on how we could refinance when I will be 62 in 2015.  When I talked with a loan person, I was told that it may take thousands of dollars we would have to come out of our pockets in order to refinance.  Now I am worried that we may not have the funds to do this. And, I will never get on this loan.

 Since then, I have researched and found out that HUD revised the policy on non- borrowing spouses and now there is protection for new loans going forward.  However, this will not help me.  I am so worried.  We did this reverse, thinking that we were saving our home and have peace of mind in our golden years.  However, this is a constant concern of ours.” 

HUD’s no-legal-authority stand on the existing NBS problem is penny-wise and dollar-foolish.


Copyright (c) 2014, ThinkReverse LLC. All Rights Reserved

Big HECM NBS Questions

Monday, June 2nd, 2014



HUD needs to provide answers to some big HECM non-borrowing spouse (NBS) questions, and we will get to those questions soon.

Sue Jones* of California left a blog comment for me, expressing desperation for help with impending foreclosure proceedings after the death of her borrowing spouse who took HECM reverse mortgage a few years ago.

Jessica Levy* of Georgia sent an email and followed with a phone call, saying she is worried that if her husband dies, she will lose her home because she was left off the HECM loan.

The plight of these two existing non-borrowing spouses highlights the unfinished and thorniest parts of the 25-year-old HECM NBS problem, despite the publication of Mortgagee Letter 2014-07 on April 25, which signaled HUD’s desire to solve the problem for prospective loans, for which HUD should be commended.

But more needs to be done to solve the other parts of the NBS problem: existing spouses facing foreclosures and existing spouses expecting foreclosures when their borrowing spouses die. Here are four big questions begging for urgent answers from HUD:

1) How many existing HECM non-borrowing spouses are currently facing foreclosures?

2) How many existing HECM non-borrowing spouses could face foreclosures if their borrowing spouses die tomorrow?

3) What is the total dollar amount of the legacy NBS problem for current and prospective foreclosures?

4) How is HUD going to solve these problems?

The we-can-do-nothing-about-existing-NBS-loans approach indicated in ML 2014-07 is a non-starter as future posts on this blog will argue.


*Names altered for privacy




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