House Democrats Call for Expanded Reverse Mortgage Protections

A group of 17 Congressional Democrats sent a letter to Department of Housing and Urban Development Secretary Julian Castro, calling for more foreclosure protections for Home Equity Conversion Mortgage borrowers' spouses.

Led by Rep. John Lewis, D-Ga., the group wants Castro to direct HUD and the Federal Housing Administration to extend to all HECM-borrower spouses the protections that were recently offered to surviving spouses of HECM borrowers whose loans were originated after Aug. 4.

"HUD has not taken action to protect surviving spouses subject to existing reverse mortgage loans from losing their homes. The same protections must be offered to every surviving spouse regardless of when their reverse mortgage was created," the letter reads.

A group of surviving spouses, whose names were not on the titles when their partners got loans under the government reverse mortgage program, sued HUD after finding themselves threatened with possible foreclosure after their spouses' died. The litigation led to the Aug. 4 policy change. Also as a result of the litigation, HUD has been working on drawing up a new policy for the spouses of borrowers who took out loans previous to that date.

The FHA-backed HECM program allows borrowers age 62 and over to take out reverse mortgages and withdraw equity from their homes while still living in them, so long as they can meet certain conditions. When a HECM borrower dies or leaves the home for a certain period of time - to, for example, permanently enter an assisted care facility - the outstanding balance of the HECM loan becomes due. The borrower or the borrower's estate must generally either pay off the loan using other assets or sell the home on the open market to pay off the loan. The proceeds of the sale may be used to pay the loan off and whatever is left over from the equity is retained by the estate or the borrower if he or she is still living.

A spokesman said HUD didn't have an immediate response to the letter and declined additional comment. HUD typically declines comment on pending litigation, and the letter generally addresses issues that are related to the ongoing legal battles.

A recent court filing by HUD suggests that in light of the fact that policy is still pending for "non-borrowing spouses" whose partners took out loans before Aug. 4, HUD is currently willing to consider postponing foreclosures on consumers in this category and has done so in at least one case.

In addition to Lewis, other Democrats who signed the letter include Rep. Barbara Lee, Calif.; Rep. Keith Ellison, Minn.; Rep. Bobby Rush, Ill.; Rep. Henry "Hank" Johnson, Ga.; Rep. Alcee Hastings, Fla.; Rep. Suzanne Bonamici, Ore.; Stephen F. Lynch, Mass.; Rep. Alan Grayson, Fla.; Rep. William Keating, Mass; Rep. Mark Takano, Calif.; and Sheila Jackson Lee, Texas.