On Notice and Request for Comment Regarding the Alternative Option for Claim Payment Announced in Mortgagee Letter

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1 Department of Housing and Urban Development Home Equity Conversion Mortgage (HECM) Program: Mortgagee Optional Election Assignment for Home Equity Conversion Mortgages (HECMs) With FHA Case Numbers Assigned Prior to August 4, 2014 Solicitation of Comment On Notice and Request for Comment Regarding the Alternative Option for Claim Payment Announced in Mortgagee Letter FR 6743 (February 3, 2015) Docket No. FR-5735-N-04 By Sandy Jolley, Reverse Mortgage Suitability and Abuse Consultant On Behalf of Consumers (HECM Borrower s and/or Non-Borrowing Spouses) March 8, 2015 I respectfully submit the following comments to Mortgagee Letter , on behalf of consumers who are either the Non-Borrowing Spouse or the Borrower of a HECM Loan. Sandy Jolley, Reverse Mortgage Suitability and Abuse Consultant Mortgagee Letter essentially excludes all Non-Borrowing Spouses from being able to remain in their property. This problem was created by the actions of HUD, the lender at origination, and exacerbated by the loan Servicer who more often than not accelerates foreclosure upon the death of the borrowing spouse. Displacement of the Surviving Non-Borrowing Spouse is not the result of actions by the consumer nor is it the desired outcome of any married couple who obtains a HECM reverse mortgage. THE HECM PROGRAM INTENTION The reverse mortgage program was created as way for seniors to remain in their home until they die. The marketing to this day promises A reverse mortgage is a safe government insured loan that allows seniors to stay in their homes until they die. ORIGINATION PROCESS 1. At origination of the reverse mortgage, both HUD and the lender know what the outcome will be for the Surviving Spouse.

2 2. More than 90% of consumers report the salesperson did not provide any clear disclosure of the consequences of removing a spouse from title. 3. At the signing of the loan docs the following occurs. a. The consumer is presented with 100 to 200 pages of legal, binding, complex documents to sign and be notarized in the space of approx. one hour to an hour and a half. b. At loan signing, it is the first time the consumer sees the loan documents and has no time to review or seek professional advice on the suitability of the reverse mortgage c. If there is a disclosure regarding the non-borrowing spouse rights (not always given) it is not clear that the spouse is giving up their right to the property, all homeowner s rights, and will be foreclosed and evicted on the death of the borrowing spouse if they can t repay the loan. d. 90% of the time the consumer is not provided with a signed executed copy of the loan documents they sign e. The consumer is not given any instruction to seek financial or legal advice on the consequences of removing one spouse from title f. The consumers have 3 days to discover on their own and review the non-borrowing spouse disclosure (when provided), determine if it is harmful, and rescind/cancel the reverse mortgage. g. When the Borrower dies, the majority of Surviving Spouses will not be able to repay the loan for either 95% of the appraised value or the loan balance as the equity was consumed by the compounding interest and fees of the reverse mortgage. h. The lender will foreclose and auction the property as soon as 60 to 90 days after the death of the borrower. NOTHING IN THIS PROCESS FULFILLS THE INTENTION OF THE HECM PROGRAM OR PROVIDES ANY PROTECTION JOINTLY TO THE COUPLE OR INDIVIDUALLY TO THE NON-BORROWING SPOUSE. Reality of what happens in the Non-Borrowing Spouse circumstance: No married couple would think on their own to remove one spouse from title of their joint property. In the majority of cases the couple has been married for many years 20, 30, 40, 50 years or more, and owned the property together for the same amount of time. It s their home. In simple language: No couple thinks on their own let s get a reverse mortgage and take one of us off title so when the other dies the survivor can be evicted. In all cases, the originating lender tells the couple to take one spouse off title. A few common reasons given by the lender - to qualify faster, get more money, one isn t yet 62, or when both are age qualified take the younger one off so you don t have to bring money to closing, etc. No couple would choose to remove one spouse from title for these reasons. Consumers are verbally told the non-borrower would still be protected, could get their name right back on title or would automatically be on title at age 62.

3 All consumers in this situation report they were never told the following: The nonborrowing spouse is giving up their interest in the property. The property becomes the sole asset of the Borrower. To get the non-borrower on title will require a refinance of the existing reverse mortgage (this option is generally not available because there is no remaining equity, the consumer would have to bring thousands to close, or the PLF). The nonborrowing spouse is unprotected and the loan will become due and payable upon the death of the borrowing spouse. Most consumers report: If the couple had been informed of any of this they would never have agreed to a reverse mortgage. Example 1 Non-borrower is not age qualified KH Origination: When this loan was originated the husband was 65 and the wife 60. The originating salesperson told the couple she only needed to take her name off title until she was 62. The couple was very concerned about the wife being unprotected and giving up her right to the property. The salesperson assured them she would be able to get on title as soon as she turned 62 and was fully protected. Two years after the origination of the reverse mortgage, on her 62 nd birthday the couple met with their Trust Attorney and was informed that they would have to refinance into a new reverse mortgage and bring $60,000 to close the loan in order to have her name back on title. That was impossible because of the first reverse mortgage. One reason consumers get a reverse mortgage is so they don t have any large cash outlays for the mortgage. Her case is the typical scenario for non-borrowing spouses. Servicing/Foreclosure: The borrower (husband) died in Ten (10) days after his death the surviving spouse was sent a repayment letter and a pre-foreclosure letter. The Servicer has denied all consumer rights as to time/extension or right to purchase or sell the property, made a legal determination to the validity of her Trust, refused to speak to her directly, and refused to respond to three (3) separate requests by consumer and her attorney regarding her ability to qualify to retain the property as a Non-borrowing spouse. Example 2 Age qualified non-borrower: AH Origination: The husband was 80 and the wife was 76. The lender was informed the husband had mild dementia and a previous stroke. Their existing mortgage was $554,500. The salesperson told the couple they had to give him $181,850 to qualify faster. That was $2,300 more than they had in their life/retirement savings. The salesperson advised the couple to take the age qualified wife off title temporarily and give him their life savings of $178,900 in order to qualify faster. Their life savings was intended to provide financial security through retirement. The couple felt uncomfortable doing this and expressed their fears but the Lender assured them it was a normal procedure and it would only be for a month or two and the wife would automatically be back on title as co-borrower. The promise was verbal not in writing.

4 The lender removed the property from their trust and made the loan in the husband s name only. At their regular meeting with their estate attorney he expressed concern the property was not in the trust. A new Deed was filed with husband and wife on title and the property transferred back into the trust. The couple thought they were now protected. Servicing/Foreclosure: In 2012 the husband died from leukemia. The wife was informed her name was not on title as promised by the lender when she received a foreclosure notice. The loan Servicer said the best they could do was to refinance into another reverse mortgage and the wife would need to give them an additional $108,000, which would be impossible since they took her life savings of $178,000 at origination. The Lender/Servicer intentionally deceived, and defrauded them of their life savings and property leaving the wife unprotected and financially destitute after her husband s passing. Example 2 Documents: 1. Counseling Certificate Attachment 1: a. The counseling certificate lists the homeowners of the property as both the wife and husband. b. The counseling certificate does not mention the Non-borrowing spouse issue or the consequences of removing one spouse from title were reviewed. c. HUD Housing Counselors cannot give any advice of any nature, and especially are not qualified to give legal and financial advice on consequences of removing a spouse from title. 2. Ownership Interest Certification (Non-Borrowing Spouse) Attachment 2 a. The first sentence in the box The Lender does not recommend or require any changes to the ownership of the property as a condition to making a reverse mortgage loan. THIS IS COMPLETELY CONFUSING AND UNTRUE. THIS REVERSE MORTGAGE WOULD NOT HAVE ORIGINATED UNLESS THE AGE QUALIFIED SPOUSE WAS REMOVED FROM TITLE AND THE LENDER TOOK THEIR $178,000 LIFE SAVINGS. b. The form was not completed by the lender, has no property address and neither box regarding non-borrower status is checked. c. This form was in the middle of almost 200 pages of documents the couple was seeing for the first time and signing with a notary in 1 ½ hours. They did not understand they were agreeing to the wife giving up her right to the property, her right to remain in her home, and their life savings. This loan provided absolutely no benefit to the couple. Any other option except a reverse mortgage would have been better. Instead, ML provides no relief to the widowed surviving spouse and directs the loan servicer to foreclose and evict the surviving spouse. CONCLUSION

5 It is disgraceful that HUD is intentionally violating the intention of the HECM program to keep seniors in their home, and forcing the foreclosure and eviction of surviving spouses shortly after the borrower spouse dies. The HECM program was not created to displace seniors from their homes to stabilize the FHA insurance fund. It s outrageous to punish consumers for the failure of HUD to manage the HECM program and provide benefit to elderly consumers. HUD must act in a responsible manner to protect the intention of the HECM program as a safe government insured loan that allows seniors to stay in their homes until they die. I respectfully request a full moratorium on all HECM loans were there is a nonborrowing spouse until HUD is able to fulfill the intention of the program with the proper guidance so senior consumers can remain in their homes until they die. Sincerely, Sandy Jolley Sandy Jolley Reverse Mortgage Suitability and Abuse Consultant