Recent Updates to Reverse Mortgage Protections

A reverse mortgage is a type of loan that allows older homeowners (62 years or older) to access a portion of their home equity as cash. Unlike a traditional mortgage, borrowers don’t make monthly payments. Instead, the loan balance grows over time as the borrower receives payments from the lender, with interest and fees getting added to the principal amount owed. The loan becomes due, with interest, when the last surviving borrower passes away, sells the home, or permanently moves out.

The U.S. Department of Housing and Urban Development (HUD) has made significant improvements to the options available for reverse mortgage borrowers at risk of foreclosure due to defaulting on property charges like taxes, insurance, and homeowner association fees.

Key Updates:

1. Eliminating Ban on Successive Repayment Plans

Previously, borrowers could only get one repayment plan to catch up on delinquent property charges. Now, there is no limit on the number of repayment plans a borrower can get, allowing for more flexibility.

2. Including HOA/Condo Fees in Repayment Plans
Mortgage servicers now have discretion to include delinquent homeowner association and condominium fees in repayment plans, in addition to taxes and insurance.

3. Improving the “At-Risk Extension”

The “At-Risk Extension,” which allows servicers to delay foreclosure for borrowers over 80 with critical health issues, has been enhanced. It now stays in place as long as the borrower remains in the home, eliminating the need for annual renewals.

4. More Flexibility for Smaller Arrears

For borrowers less than $5,000 behind on property charges, servicers no longer have to call the loan due and payable immediately. Instead, they can work with borrowers to create a plan to catch up on arrears.

5. Expanded Cash-for-Keys Incentives

As of March 25, 2024, servicers can offer enhanced “Cash-for-Keys” incentives of up to $7,500 (plus $5,000 for probate costs) to borrowers or heirs who pursue alternatives to foreclosure like deed-in-lieu or short sales. Higher incentives are available for quicker vacating of the property post-foreclosure.

Advocates should make reverse mortgage borrower clients aware of these new protections and options. Refer clients to HUD-approved housing counselors (1-800-569-4287) for assistance understanding their rights and working with servicers. Additional resources are also available from the National Consumer Law Center and Consumer Financial Protection Bureau. (Resource: New Protections for Older Homeowners with HECM Reverse Mortgages)

About the APILO’s Elder and Disability Rights Project:

APILO’s Elder and Disability Rights Project provides legal services in a variety of areas to assist elders and individuals with disabilities to receive public benefits and live a life free from abuse. The Elder Team works to both to prevent abuse towards elders and people with disabilities and to assist survivors of abuse. We work closely with senior centers, churches, and senior meal sites to keep our services accessible. With a team of exemplary attorneys and dedicated staff, the team provides a wide range of legal services, including naturalization assistance, other immigration cases, elder abuse, estate planning, eviction defense, conservatorship, guardianship, and restraining orders to name a few.

If you want to learn more about what our team does, please feel free to reach out to us.