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Mortgagee Letter 2015-03 is a cruel bureaucratic farce.
Sold by HUD as displacement relief for existing and future widowed spouses of reverse mortgage borrowers, it will actually do the opposite by design. Few if any widowed spouses will be able to meet its conditions, and their dead spouses’ lenders will be forced to pursue illegal foreclosures to recover their investments. The result will be foreclosures and displacements of spouses who are protected under federal law against such action.
Take Dianne Barnes Riddick of Woodbridge, Va.. Her husband, the Rev. Lewis Melvin Riddick, died in February 2014. Relying on an illegal regulation, a reverse-mortgage lender foreclosed on her home in October 2014. Since then alleged agents of Fannie Mae have been harassing her. Any day now, a county sherif will pull up in front of her house and order her to leave. According to reports, Mrs. Riddick is in deep mental and physical anguish.
There are no accurate numbers because HUD is hiding the true extent of the existing HECM non-borrowing spouses’ foreclosure and displacement crisis from the court and from the public. But simply take Mrs. Riddick and multiply her plight by 12,000 (that is one estimate attributed to National Reverse Mortgage Lenders Association in federal court papers) and you will begin to appreciate the scale of the problem some bureaucrats at HUD are trying to hide from the public.
A 1988 federal law says HECM borrowers’ spouses, whether or not they signed loan papers as borrowers, should be protected from displacement. Until August 4, 2014, HUD regulations denied the non-borrowing spouses that protection. Over the years, perhaps hundreds have been kicked out of their homes illegally.
In 2013, a federal judge ruled that HUD regulations violated federal law and asked HUD to come up with a solution (relief) to the plaintiffs’ displacement problems.
Initially HUD claimed in court papers that it has “no authority” to solve the displacement problems. To repeat, the author of the problems says it has “no authority” to clean up its own mess. When in response plaintiffs filed another lawsuit demanding a jury trial, suddenly HUD said it had “some discretion” in an agency decision paper. It is in that paper, called Plunkett Determination on Remand in June 2014, that HUD first introduced the so-called Mortgagee Optional Election (MOE) Assignment formula that has now morphed into ML 2015-03.
In our next post we look at the MOE Assignment conditions and their implications.
Author and reverse-mortgage reformer, Atare Agbamu fought successfully for unconditional nonrecourse in reverse mortgages in the United States. In 2014, the US Department of Housing and Urban Development (HUD) adopted and codified Agbamu’s policy proposal into federal regulation to solve a 25-year-old non-borrowing spouse problem in reverse mortgages. A former reverse-mortgage loan originator and industry executive, Agbamu is author of ThinkReverse and more than 250 articles on reverse mortgages.