1.2.11 Reverse Mortgage Foreclosures
Reverse mortgage loans are a special type of home-secured loan that allows the borrower to convert equity into cash without having to sell the property or make periodic payments. Most reverse mortgages are insured by the federal government and have numerous requirements that must be satisfied before the servicer can foreclose. Reverse mortgage foreclosures are typically triggered by the failure to pay property charges as they come due or by a maturity event such as non-occupancy or death of the homeowner. Questions that advocates should ask include:
- ● If the borrower has failed to pay property charges has the servicer considered the available loss mitigation options? See § 14.3.2, infra. HUD has directed servicers to address property charge defaults by considering various loss mitigation alternatives.
- ● If the loss mitigation alternatives for property charge defaults are not affordable, is chapter 13 bankruptcy an option for curing the default? See § 14.3.2, infra.
- ● Is the borrower facing foreclosure due to non-occupancy? See § 220.127.116.11, infra. Borrower’s failure to maintain the home securing the reverse mortgage as a principal residence is an event of maturity. In some instances, servicers mistakenly believe the property is no longer occupied. Non-occupancy should be a curable default.
- ● Has the loan matured due to the death of the homeowner? See § 18.104.22.168, infra. If so, did the servicer offer the heirs the opportunity to satisfy the loan for 95% of the property value? See § 22.214.171.124.3, infra. Would the homeowner’s heirs be able to pay off the amount due through a chapter 13 bankruptcy? See § 126.96.36.199.4, infra.
- ● Did only one spouse take out the reverse mortgage and is the servicer asserting the loan has matured because the borrower has died? See § 188.8.131.52, infra. If the spouse continues to occupy the property as a principal residence, the surviving spouse may be able to remain in the property notwithstanding the death of the other spouse.