AARP is one of the biggest, most influential advocacy organizations in the country. The reverse mortgage product landscape is designed to exclusively serve the demographic of U.S. seniors, so naturally, AARP and its philanthropic arm, the AARP Foundation, observes the industry’s trends and product development efforts.
After recently joining a lawsuit against reverse mortgage servicer Celink and former lender Reverse Mortgage Funding (RMF), AARP Foundation senior attorney Julie Nepveu sat down with RMD. After talking about the reasoning behind joining the Celink/RMF suit in progress, RMD also asked about other reverse mortgage issues including product development, regulatory evolution and plans for the future.
RMD/Chris Clow: AARP has always had a cautious posture regarding the HECM program. What is the foundation’s overall outlook on HECM, FHA’s role, and the reverse mortgage business overall?
Julie Nepveu: Historically, the Foundation was the first contractor for [the U.S. Department of Housing and Urban Development (HUD)]. We are the ones who came up with the initial counseling program, and it’s been a long time since we were involved in developing the counseling program. But since then, we have litigated a number of cases regarding reverse mortgages, including the Bennett v. Donovan case that resulted in protection for non-borrowing spouses.
So we’ve been very active in protecting older homeowners in the HECM program for a long time. AARP itself files federal comments, we have lobbyists who work on that program. We have experts who testified in front of Congress about the need for greater consumer protections to make sure that older homeowners understand what they’re getting into and that they are not going to lose their homes for reasons that they shouldn’t be.
Clow: The HECM program in particular has changed a lot of consumer protection practices over the past decade, and there’s certainly a lot of activity in the realm of the HECM program by the Biden administration. Do you feel like HECM has improved during that time even if there may be some shortcomings that you still seek to correct?
Nepveu: Well, there have been some recent proposed changes that we hope will go into effect in the near future to provide greater amounts of loss mitigation, for example. HUD recently came out with a Mortgagee Letter saying that they are going to make some changes, including increasing the amount of arrearages that people can have up to $5,000 before a servicer has to foreclose on the property. We think those are important changes.
There are still a lot more changes, and now HUD is getting ready to add all the Mortgage Letters and all the HECM stuff to the new HUD Handbook 4000.1, [adding] something like 250 pages of new material.
It’s not exactly one-to-one from the Mortgagee Letters to the Handbook, so we’re still reviewing that, but we believe it’s a better path. And we still hope that there’s a lot more that we can do to help protect older homeowners and mortgagors. We don’t want this program to be bad for anyone, we want it to be good for everyone, but we’re more concerned about protecting older folks.
Clow: Is there any upcoming advocacy the Foundation has in the pipeline regarding senior homeowners either in reverse mortgages, but also more broadly and generally that you might be able to tell me about?
Nepveu: I’m just not aware of what else the AARP is doing, but I do know that AARP files comments about HECM programs all the time. There’s one due very soon that we’re planning to file on recording assignments of HECMs. We work very closely with the lobbying side of AARP, and the Foundation side is really the charitable side. So, we don’t do advocacy so much as we do mitigation.
The AARP Foundation has a program for property tax aid, for example, and that helps people who have reverse mortgages that may be able to get some local discounts, or whatever the local taxing authority calls it. It’s a rebate, a discount, a tax benefit, etc. But that reduces property taxes on older folks’ homes.
And that’s really important, because if a HECM servicer is paying the full tax amount, then the borrower has to repay the full amount when maybe they didn’t have to pay the full amount in the first place. The property tax program that the foundation is doing is not limited to HECM borrowers, it’s for anyone who’s older. And we’re very proud of that program.
It’s been helping a lot of folks take advantage of some of the benefits that are available to them that they might not know about, and also make it easier for them to afford repairs, food or medicine. Because the taxes go up every year for a lot of folks, and it’s very difficult to keep up with that when you’re living on a fixed income.
Clow: Is there anything else you think our audience of reverse mortgage professionals should be aware of regarding the AARP and Foundation’s reverse mortgage efforts?
Nepveu: Part of this lawsuit is about fairness. The notice provisions that the lawsuit alleges were violated are really important, because I think that older people especially get confused by the notices that are sent out by the mortgage companies. And I have read some of the notices not only involving this complaint or the Shakespeare complaint, or the hundred other recourse mortgage or due and payable notices, including tax payment notices, and they’re basically incomprehensible.
I think that if I would say anything, it’s that these notices need to be revised so that people can understand them, and with the actual borrowers in mind. We’re talking about folks who are 75 or 80 years old, they get these notices saying they’re delinquent on taxes and/or insurance. Well, which one is it?
Or, “You can either do one of these five things, or you can sell your house to us.” Wait a minute, why do I have to sell my house to you? Why can’t I just cure the violation? It’s a very alarming thing, and I think a lot of people just don’t understand these notices. So if there’s anything I would say to the industry, it would be to make these notices comprehensible to older folks, the customers. They advertise and can make the advertisement understandable, so they should make their notices understandable.
