Reverse mortgages allow homeowners 62 and older to tap into their home equity while remaining in their homes. This product is a useful and necessary resource for many senior homeowners with incomes that are insufficient to cover their living expenses. In ideal cases, reverse mortgages are not due and payable until the borrower dies or moves out of the home. However, if a borrower falls behind on property taxes, homeowners insurance, or necessary home repairs, the lender will move to foreclose.
In recent years, reverse mortgage defaults and foreclosures have dramatically increased both in New York and nationwide, putting many senior homeowners at risk of displacement. Elderly homeowners who have invested their life savings in their communities are now being foreclosed upon for minimal sums, bank errors, and their failure to sign a form proving their occupancy, with some having no knowledge that they may lose their home.
Starting in June of 2016, the Center began examining the causes of this spike in reverse mortgage foreclosure.
The Center identified seven factors that we believe are contributing to recent increases in reverse mortgage defaults in New York:
- HUD regulations do not encourage lenders to work with homeowners in default.
- Lender communication to borrowers about defaults and options are inadequate and inconsistent.
- Lenders are paying property taxes prematurely or failing to recognize municipal payment arrangements.
- Surviving spouses and heirs do not receive notice about their rights.
- Property inspection fees are unregulated.
- Strict requirements for proof of occupancy can lead to foreclosure.
- Tax exemption programs are underutilized.