Reverse mortgages have come under intense scrutiny due to perceived abusive lending practices, particularly concerning seniors. Congress met after the publication of a special report conducted by USA Today, with help from Grand Valley State University and the McGraw Center for Business Journalism. The report showed borrowers being forced into foreclosure over property tax debts and mistakes made during loan servicing.
About Reverse Mortgages
A reverse mortgage is a type of home loan that allows someone 62 or older with significant home equity to borrow against the value of their home and receive money all at once. It can be collected as a fixed monthly payment or line of credit. As opposed to most others, reverse mortgages free the homeowner from having to make loan payments. Reverse mortgages are intended to provide seniors peace of mind when it comes to their home and financial stability.
A number of lenders have used reverse mortgages to target low-income seniors by aggressively marketing the loans and pressing older homeowners to borrow money, without explaining the risks. According to USA Today, 100,000 reverse mortgages of 1.3 million loan records have failed from 2013 to 2017.
Led by House Democrats Denny Heck (Washington) and Lacy Clay (Missouri), the proposed legislation will revise the Home Equity Conversion Mortgage (HECM) program to offer added protection for non-borrowing spouses and force the Department of Housing and Urban Development (HUD) report to congress annually the number, percentage and reasoning behind reverse mortgage foreclosures caused by delinquent tax and insurance payment defaults.
Another form of legislation would serve as a codification from the White House to obey the maximum loan limit for reverse mortgages. The aim of this bill would match the loan limit for reverse mortgages insured by the FHA with the area maximum limits for FHA-insured mortgages.
Reverse mortgages have long been seen as a safety net for seniors to stay in their homes. While the new proposed legislation would help, lawmakers agree more action is needed to protect seniors from foreclosures.
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