CFPB Releases New Guide To Reverse Mortgages For Consumers

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The Consumer Financial Protection Bureau (CFPB) on Tuesday announced the release of a recently updated consumer resource guide on the reverse mortgage product category. The guide, titled “You Have a Reverse Mortgage: Know Your Rights and Responsibilities,” explains in detail the typical loan obligations of the Home Equity Conversion Mortgage (HECM).

It also explains how the loan can be repaid; what happens to the home when the borrower moves or dies and how this affects the loan; what it means to default on a reverse mortgage and how to get help if it happens and the common components that should be known to the heirs of a borrower.

Loan obligation details

The guide aims to provide consumers with relevant information regarding the obligations that must be met if they take out a HECM loan, and clarifies that some specific requirements may be different if the borrower commits to a mortgage product instead. reverse exclusive to an agency offered by a lender. , such as “HomeSafe” from Finance of America Reverse (FAR) or “Platinum” from Longbridge Financial.

The guide gives important details on the main loan obligations: first, that the residence secured by the reverse mortgage should be the borrower’s primary residence, while reviewing different scenarios that may arise depending on the length of a person’s absence. their house. It also details how some seniors may find an occupancy check worrying or confusing, while also explaining the need to respond to such a request in a timely manner.

The second major obligation detailed in the guide is the need to pay property charges on time. These can include property taxes; home insurance; flood insurance; homeowners association fees (HOA); costs of ground units, condominiums or planning units; and any other special contribution.

It also details the differences between the land charge requirements for loans made before and after April 2015. For loans made before that date, a borrower could have requested that the land charges be paid out of the loan proceeds, while lenders then assess the borrower’s ability to pay them. fees and may require a set-aside specifically for property taxes and home insurance. A disclaimer also states that these layaways do not cover condominium, HOA or other charges.

The final primary obligation covered by the guide is to keep the home in good repair, detailing the 60 day requirement for repairs if the lender or maintenance agent advises the need. If someone cannot afford repairs, CFPB directs people in this situation to their local Aging Agency (AAA) to find assistance programs that might be helpful.

Difficulty in fulfilling the loan conditions, reimbursement of the HECM

For people who have difficulty meeting loan requirements, the CFPB guide advises such borrowers to immediately contact their loan manager upon receipt of a notice of default or foreclosure. An attorney or HUD-approved default housing counseling agency may be able to help you and can explain the options available in light of a foreclosure or default notice.

The bureau also refers borrowers to an already published guide on what to do if a reverse mortgage borrower has been affected by a natural disaster. This guide was released in September 2019 and uses plain language to teach elderly homeowners how to meet their reverse mortgage requirements while recovering from the effects of a natural disaster.

The guide also provides details on what happens to the loan after the borrower dies, and includes a recently revamped section on non-borrowing spouses and the options available to these people if they have been assigned a case number before. or after August 4, 2014.

Industry response, history

Asked about the creation of this new guide by the CFPB, National Reverse Mortgage Lenders Association (NRMLA) President Steve Irwin expressed his encouragement for the availability of another resource designed to help consumers make choices. important things necessary in the decision to obtain a reverse mortgage. .

“As with any mortgage product or equity extraction product, the reverse mortgage borrower has certain obligations,” Irwin told RMD in an email. “The CFPB has provided an updated guide to the FHA-Insured Reverse Mortgage, which explains the obligations and rights of reverse mortgage borrowers. I encourage borrowers and applicants to familiarize themselves with this valuable resource to ensure that the reverse mortgage is the right option for their retirement plan.

This is the latest revision of a reverse mortgage resource guide that the Bureau has released on the product category, but some in the industry have already questioned how the industry-relevant information. are presented by the Bureau.

In 2017, the CFPB issued a report with a disclaimer, saying taking out a reverse mortgage could be an “expensive way to maximize Social Security benefits.” This warning has been criticized by both reverse mortgage industry participants and the National Reverse Mortgage Lenders Association (NRMLA). This guide was reissued with a Spanish translation in mid-2019.

Read the guide recently published on the CFPB website, where it can also be ordered in physical form.

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