IMPEDIMENTS TO
STABILITY IN SENIOR
CITIZEN
HOMEOWNERSHIP
Lynn Drysdale, Jacksonville Area Legal Aid
 Equity
Skimmers – friend and
foe?
 Reduced income – loss
mitigation and survivors rights
 Reverse mortgages………..
IMPEDIMENTS TO STABILITY IN
SENIOR CITIZEN
HOMEOWNERSHIP
Reverse mortgage Life Raft or Titanic??
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FHA-Insured Reverse Mortgages: the Home
Equity Conversion Mortgage (HECM);
Borrower must be at least 62
Proceeds may be taken as a lump sum, line of
credit, or an annuity
No monthly payments of principal or interest;
interest, but hefty servicing fee is added to the
loan balance each month

Initial principal amount loaned is
based on:
 Appraised value of the house
 Prevailing interest rates
 Age of the youngest borrower
(older = higher loan proceeds)
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The last surviving borrower dies
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The last surviving borrower sells the home or
transfer the title (however, borrowers can convey
title after closing as long as they retain at least a
life estate interest in the property)
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The borrower changes their principal residence
(may be away from the home for up to 12 months
if the absence is due to medical reasons)
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Borrower fails to pay property charges or maintain
the property in “saleable” condition
6
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First Answer: What Rules
Servicers make up the rules as they go along
Servicers filed mortgage foreclosure cases
when they should not, examples?
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The Mortgage Company
Pays the Taxes and
Insurance From Reserves?
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The reverse mortgage borrower must continue to
cover “property charges,” including:
Property taxes
 Homeowner’s insurance
 HOA/COA fees
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Sometimes servicers pay taxes and insurance
premiums before they are due!
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This can be confusing to the borrower because
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The Borrower has to pay taxes and insurance, which
may be hard to get used to if the borrower has
always “escrowed” AND

Often the taxes and insurance are paid through the
loan company the first year
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RMS could not provide a witness at a
deposition who could explain why they “force
placed” insurance when they had a copy of the
borrower’s copy
…….and the premiums for “forced placed”
insurance can be 3 or 4 times more expensive
as the insurance a borrower would purchase
on their own
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Last year, an actuarial report for HUD by an
consulting firm estimated that 19.7 percent of
reverse mortgages issued between 2009 and
2015 would suffer tax and insurance defaults in
their lifetime
Nearly 24,000 borrowers in the U.S. received
notices that their reverse became “due and
payable” in the 2015 federal fiscal year ending
last September, triple the level of 2014,
according to HUD
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CIT/Onewest filed a mortgage foreclosure
lawsuit against a 90 year old client for failing to
pay .27 cents it claims she owed for “force
placed insurance”
This was its second foreclosure lawsuit in less
than two years against the borrower, the first
was filed for “non occupancy” and served on
her at her home “her principal place of abode”
It threatened her with a 3rd foreclosure, during
the 2nd one……
 ……HUD
makes use do
it (not true as you will
see)
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Loan servicer was required to offer preforeclosure repayment options
Servicer could not “call the loan” until it had
made an “earnest attempt” to work with
homeowner to cure the default
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As of April 23, 2015; loan repayment options
became permissive (not mandatory)
Property Charge Delinquency Letter (as soon as
Servicer knows of default) must inform borrower
of these options:
Refinancing the defaulted HECM if possible
 Local assistance programs (Hardest Hit Funds ELMORE)
If these two options will not work, servicer may offer:
 Repayment plan
 Extension of foreclosure timelines for “At Risk”
Mortgagor
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Due and Payable Notice (Within 30 days of
default unless Loss Mitigation extension)
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Must reference any available foreclosure avoidance
options including option to sell or execute deed in
lieu, and refer to HUD counseling agency
May not accelerate the loan until 30 days after Due &
Payable Notice
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Issued March 30, 2016
New option: Servicer may delay foreclosure if the
arrearage is less than $2,000 and the borrower
has expressed willingness to pay and is attempting
to pay, or lender has not yet been able to reach the
borrower
New option: “Mortgagee Funded Cure”
Mortgagee may advance the funds to pay property
charges
 May not include the advanced funds in a claim to HUD
 May not assign the loan for 3 years has passed where
borrower has paid the T&I on time
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If a Repayment Plan is insufficient or unsuccessful, Mortgagee
may request an additional extension if:
 Youngest living mortgagor is at least 80 years old, and
 Mortgagor has critical circumstances such as supported
terminal illness, substantiated long-term physical disability,
or a “unique” occupancy need (e.g., terminal illness of family
member receiving care at the residence)
 Supporting documentation on an annual basis
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Some low-income and elderly homeowners have
special arrangements with the taxing authority –
payment plan, grace period, etc.
Servicers cause problems by paying the taxes
before they are due, then claiming the loan is in
default and borrower must qualify for a repayment
plan to pay back the advances.
HECM Loan Agreement:

"2.10.5 If Borrower fails to pay the property charges in a
timely manner, and has not elected to have Lender make
the payments, Lender shall pay the property charges as a
Loan Advance as required under Section 2.16. If a
pattern of missed payments occurs, Lender may establish
procedures to pay the property charges from Borrower’s
funds as if the Borrower elected to have Lender pay the
property charges."
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As long as you live in
your home you are “okay”
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The mortgage and note are “in default” if the
borrower:
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Ceases to treat the property as their principal
residence for reasons other than death and the
property is not the principal residence of at least one
other borrower
The borrower fails to occupy the property for more
than 12 consecutive months because of mental or
physical illness and the property is not the principal
residence of at least one other borrower
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You can lose your home for not returning a
postcard confirming occupancy (sometimes a
letter)
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YOU CAN LOSE YOUR HOME IN A REVERSE
MORTGAGE LAWSUIT FOR NOT
RETURNING A LETTER
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THIS IS NOT A REQUIREMENT OF THE
MORTGAGE OR NOTE AND IS AN
ARBITRARY AND ELUSIVE “RULE”
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……..filed a non occupancy lawsuit against a
woman in her 70s for failing to live in her home
even though they had talked with her multiple
times during the “non-occupancy” period, once
she ask them why they kept bothering her
about living in her home, and she had returned
her “occupancy certificate”
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Files a foreclosure lawsuit – non-occupancy
default, serves the foreclosure complaint on the
elderly borrower at his home
Had been in contact with him all during the time
he purportedly “did not live” for an insurance
repayment, he was sending them checks from
his home with his home address
HIS CRIME – NOT RETURNING AN
OCCUPANCY CARD *Note, what do we tell
our elderly parents????
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And I quote…….
“You're trying to make logic out of an illogical
situation.”
This is seriously how we treat our senior
citizens?
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Although not required by the mortgage, the
borrower is “supposed” to return an annual
occupancy letter
Sometime servicers are claiming the home is not
occupied when borrower still living there
Did borrower fail to return occupancy verification? Did
servicer take any additional steps to verify occupancy?
 Did the servicer have every indication the borrower lived
there?
 REPEAT, NOT RETURNING A CARD IS NOT A
DEFAULT BASED UPON THE LANGUAGE OF THE
MORTGAGE OR NOTE
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HUD had allowed lenders to give a loan to one
of two spouses and ignore the younger spouse
so it could lend more money to more people
(avoiding the 62 year age limit)
The mortgage claimed the loan was in default
upon the death of the borrower – spouse was
not protected
This contradicted the HECM authorizing statute
In a section titled, “Safeguard to Prevent Displacement
of Homeowner,” the statute provides:
The Secretary may not insure a home equity
conversion mortgage under this section unless such
mortgage provides that the homeowner's obligation to
satisfy the loan obligation is deferred until the
homeowner's death, the sale of the home, or the
occurrence of other events specified in regulations of
the Secretary. For purposes of this subsection, the
term "homeowner" includes the spouse of a
homeowner.
HUD’s regulation provides:
“The mortgage shall state that the mortgage balance
will be due and payable in full if a mortgagor dies and
the property is not the principal residence of at least
one surviving mortgagor . . .”
24 C.F.R. § 206.27(c)(1)
 HUD also required any HECM-insured lender to
use a mortgage contract that says the death of the
mortgagor (borrower) triggers the loan becoming
due and payable.
 (This changed for new loans originated after
August 4, 2014. See Mortgagee Letter 2014-07)
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Spouses of reverse mortgage borrowers who are not
themselves named as co-borrowers are often unaware that
they are at risk of losing their homes. If the borrowing
spouse dies or needs to move, the non-borrowing spouse
must sell the home or otherwise pay off the reverse
mortgage at that time. Other family members (children,
grandchildren, etc.) who live with reverse mortgage
borrowers are also at risk of needing to find other living
arrangements when the borrower dies or needs to move.
LOAN BROKERS DO NOT INFORM BORROWERS OF
THIS RISK AND, OFTEN, SAY THE EXACT OPPOSITE!
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Bennett v. Donovan: Initially, district court
dismissed for lack of standing
Bennett v. Donovan, 703 F.3d 582 (D.C. Cir.
2013) (holding that surviving spouses had
standing to sue HUD because HUD could
redress the harm)
Bennett v. Donovan, 4 F.Supp.3d 5 (D.D.C.
Sept. 30, 2013) (holding that HUD’s regulation
allowing for foreclosure while surviving spouse
still lived in the home was invalid; remanding
to HUD to fashion a remedy)
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Edwards v. Reverse Mortgage Solutions, Inc.
187 So. 3d 895 (Fla. 3rd DCA 2016)
Smith v. Reverse Mortgage Solutions, Inc. 200
So.3d 221, (Fla. 3rd DCA 2016)
Florida Homestead laws prevail
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For all HECM’s originated after August 4, 2014,
the loan will not come due and payable until
the death of the borrower and any spouse
Loan terms must be calculated factoring in any
non-borrower spouse (so if the non-borrower
spouse is younger, loan proceeds will be lower)
A prospective fix – but nothing regarding loans
originated prior to August 4, 2014
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At first, HUD issued a policy saying that servicers
could elect to assign the loan to HUD (who would
allow the widow(er) to remain in the home until
death) if loan balance was no higher than it would
have been had spouse been factored in (this was
called the “Principal Limit test.”)
On June 12, 2015, HUD issued ML 2015-15,
giving servicers the option to assign the loan to
HUD through the MOE (Mortgagee Optional
Election) without satisfying the Principal Limit
test.
(1) Spouse must have been legally married to the borrower
at time of the loan (with an exception for same sex couples
who could not legally marry) and must have been legally
married at the time of borrower's death;
(2) Spouse must currently reside in the home as his/her
principal residence, and must have done so at time of
origination and throughout the borrower’s life;
(3) Loan not due and payable for any other reason - If there
has been a default on property taxes or homeowner's
insurance, spouse must cure any such default before the
loan can be eligible for assignment.
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Loans in the MOE “deferral period” cannot get a repayment
plan for T&I default; spouse must cure the default within 30
days
(4) Spouse must have, or be able to obtain within 90 days
of the death of the borrower, “good, marketable title to the
property” or a legal right to stay in the home until his/her
death.
 Timing: within 90 days of the
 Legal right to stay until death
 Long-term lease
 Court order
 Partial ownership interest? (one of several heirs)
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Florida Hardest Hit Fund program (Elderly
Mortgage), administered by the Florida Housing
Finance Corp.
http://floridaelmore.org/
Provides up to $50,000.00 to reverse mortgage
borrowers for delinquent property charges
(property taxes and property insurance)
Applicants must be able to show a “qualifying
hardship” that resulted in the inability to pay the
property charges
To qualify, the homeowner cannot be a debtor in
an active bankruptcy
Is the home underwater?
Remember the option to
refinance or sell the house
(pay off the RM) for the
lesser of:
• the current loan balance
or
• 95% of the Fair Market
Value.
Can the spouse (or other
heir) qualify for a forward
mortgage at 95% of the
FMV? (income, credit score)