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HUD Housing Programs: Tenants’ Rights (The Green Book): 6.3.1 Introduction

Tenants in federal housing are often subject to charges that are not technically “rent.”88 These types of charges come with many labels, including late fees, fines, repair charges, key deposits, furniture and appliance charges, fees for garbage collection, parking, cleaning, credit checks and cable TV. Although the tenant’s obligation to pay these charges arises out of the tenancy and lease agreement, they do not constitute “rent” when levied for some collateral reason other than as consideration for the use and occupation of the premises.

Home Foreclosures: 15.1 Introduction

Reverse mortgages are a special type of home-secured loan that allows seniors to convert home equity into cash without having to move out and without having to make periodic mortgage payments. In a traditional forward mortgage, the lender advances the principal at origination, and the borrower is required to pay off the loan balance over time. In contrast, reverse mortgage lenders advance funds to the borrower as a lump sum, as monthly payments, through a line of credit, or a combination of these options. No periodic payments are due from reverse mortgage borrowers.

Home Foreclosures: 15.2 Overview of HECM Reverse Mortgages

Reverse mortgages provided through the Home Equity Conversion Mortgage (HECM) program were designed to meet the needs of older homeowners by reducing economic hardship that results from increasing costs of health, housing, and subsistence needs at a time of reduced income.1 HUD administers the HECM program and promulgates HECM regulations.2 HUD also regulates the program through the issuance of mortgagee letters to approved lenders and servicers updating program guidelines or policy.

Home Foreclosures: 15.3.1 Generally

Failure to make monthly payment obligations is the most common cause of mortgage foreclosure. However, unlike traditional forward mortgages, reverse mortgages do not require monthly loan payments. Nevertheless, there are several circumstances under which foreclosure will be triggered. The leading causes are (1) failure to pay property charges, such as real estate taxes and hazard insurance, as they come due, and (2) after a maturity event, such as non-occupancy or death of the last surviving borrower, the loan becomes due and payable in full.

Home Foreclosures: 15.3.2.1 Loss Mitigation for Property Charge Defaults

While there are no monthly loan payments required for reverse mortgages, that does not mean that reverse mortgages are “payment-free.”59 Rather, the loan documents require reverse mortgage borrowers, like traditional mortgage borrowers, to pay for “property charges.” These charges include real estate taxes and hazard insurance premiums and, if applicable, condominium association fees, ground rents, or other special assessments.

Home Foreclosures: 15.3.3.1 Introduction

Reverse mortgages permit homeowners to remain in their homes until a maturity event occurs. Specifically, the HECM enabling statute states 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 the regulations by the Secretary.”113 Permanent relocation from the home will also trigger maturity under HUD regulations.114

Home Foreclosures: 15.3.3.3.2 History and past litigation of the non-borrowing spouse problem

How the Non-Borrowing Spouse Problem Arose. Under the HECM program, spouses may jointly take out a reverse mortgage if both borrowers are sixty-two years old and both borrowers are on the title to the home. When spouses have a reverse mortgage, the loan does not mature until both borrowers die, sell the home, or permanently relocate from the home. For example, if one spouse dies or moves to a nursing facility, the reverse mortgage will not be affected so long as the other spouse continues to live in the home.

Home Foreclosures: 15.3.3.3.5 Legal claims against servicers and mortgagees

With the improvements in HUD’s policies providing protection for spouses, unless there is a separate basis for default on the loan, most non-borrowing spouses should be able to obtain a deferral of the foreclosure status through the MOE program for loans made prior to August 4, 2014, or the deferral period included in the mortgage for loans made after August 4, 2014. However, if such relief is denied, claims against the servicer or mortgagee could be considered.

Home Foreclosures: 15.3.3.4.1 Overview

The most common reason for foreclosure upon a home secured by a reverse mortgage is the maturity of the loan due to the death of the homeowner. Upon the death of the homeowner, the property secured by the reverse mortgage is passed to the borrower’s heirs by will, intestacy, or other state law mechanism and the reverse mortgage becomes payable in full.

Home Foreclosures: 15.3.3.4.2 Procedural defenses

In addition to general procedural prerequisites to foreclosure,165 when maturity occurs and foreclosure proceeds after the homeowner’s death, advocates should consider any applicable state laws that impose additional requirements for foreclosure actions when the borrower is deceased.166 For example, state probate law may require different procedures for foreclosure after the death of the borrower.

Home Foreclosures: 15.3.4 COVID-19 Protections

FHA-insured HECM loans are subject to the protections of the CARES Act and subsequent policies issued by HUD to address the impact of the COVID-19 pandemic.194 The two main categories of relief are the foreclosure moratorium, and COVID-19 forbearance.

Home Foreclosures: 15.4 Raising Origination Claims

Chapter 7, supra, of this treatise explains how to raise origination claims in defense of foreclosure. Generally these claims challenge unfair lending practices used in originating the loan. Unfair lending practices refer both to the substantive terms of a contract and to the process by which the contract is struck and enforced.

Home Foreclosures: 15.5 Raising Discrimination Claims

The Fair Housing Act, the Equal Credit Opportunity Act, and state and local ordinances bar discrimination in mortgage origination and servicing. Various actions by reverse mortgage originators, servicers, and HUD may be subject to challenge under one or more of these laws. For example, foreclosures on non-borrowing spouses are likely to disproportionately harm women, since women are more likely to have been left off the loan (as, often, the younger spouse) and to live longer than a male borrowing spouse.

Home Foreclosures: Introduction

This appendix is a summary of state laws governing the foreclosure of condominium and homeowner association assessment liens. It describes the method of foreclosure, the scope of the lien, required notices, permitted fees and interest, and the right, if available, to challenge the lien. It also describes the right of the unit owner to redeem the condominium unit after a sale.

Home Foreclosures: Alabama

Ala. Code §§ 35-8-1 to 35-8-22 (Condominium Ownership Act); §§ 35-8A-101 to 35-8A-417 (Uniform Condominium Act)

Applicability: The Uniform Condominium Act, Ala. Code §§ 35-8A-101 to 35-8A-417, applies to condominiums created after January 1, 1991. With limited exception (see §§ 35-8A-302(a)(10), 35-8A-315), the provisions of the Uniform Condominium Act summarized below also apply to condominiums created before the effective date.

Home Foreclosures: Alaska

Alaska Stat. §§ 34.07.010 to 34.07.460 (Horizontal Property Regimes Act); §§ 34.08.010 to 34.08.995 (Common Interest Ownership Act)

Applicability: The Common Interest Ownership Act, Alaska Stat. §§ 34.08.010 to 34.08.995, applies to condominiums created after January 1, 1986. Communities with limited expenses are exempt from many portions of the statute.

Home Foreclosures: Arizona

Ariz. Rev. Stat. Ann. §§ 33-1201 to 33-1270 (Condominium Act)

Applicability: Arizona’s Condominium Act, Ariz. Rev. Stat. §§ 33-1201 to 33-1270, applies to condominiums created within the state without regard to the date the condominium was created. § 33-1201.

Home Foreclosures: Arkansas

Ark. Code Ann. §§ 18-13-101 to 18-13-120 (Horizontal Property Act)

Method of Foreclosure: Not specified.

Notices: Not specified.

Interest, Fees, and Costs: Not specified.

Scope of Lien: Not specified.

Ability to Contest Lien: Not specified.

Lien Extinguished: Not specified.

Explicit Right to Cure: Not specified.