Rep. Maxine Waters brought the issue of reverse mortgage foreclosures into the national conversation last month, introducing a bill designed to protect homeowners in danger of defaulting on their Home Equity Conversion Mortgages. But according to at least one expert, the California Democrat’s bill is unlikely to even receive a vote, let alone become law.
“I don’t think that’s going to even get a hearing,” said Michelle Rogers, a partner at Buckley Sandler LLP, at the National Reverse Mortgage Lenders Association’s annual meeting in San Francisco last week.
“We certainly don’t think it’s going to get passed,” Rogers added.
The bill, the Preventing Foreclosures on Seniors Act, would mandate loss mitigation for borrowers facing tax-and-insurance defaults and require lenders to inform non-borrowing spouses of their ability to remain in the home in a prompt manner, among other provisions.
“Urban foreclosures on seniors continue to be a problem in the Department of Housing and Urban Development’s reverse mortgage program,” Waters said in a statement announcing the legislation. “This bill makes key changes to help seniors who are vulnerable to foreclosure under the current program.”
While the passage of Waters’s bill remains unlikely given Republican control of Congress, the legislation illustrates the growing tensions between investors in the reverse mortgages space and the Consumer Financial Protection Bureau’s ongoing attempts to regulate the industry, Rogers said.
New disclosures likely
While the Waters legislation might be dead on arrival, support for another regulatory measure is picking up steam: “Know-Before-You-Owe” reverse mortgage disclosure rules are likely coming from the CFPB as soon as the first quarter of 2018, according to Jim Milano of Weiner Brodsky Kider, P.C.
The topic came up at a recent meeting of the CFPB’s Consumer Advisory Board in Tampa, Fla., Milano said, though there was little indication of the exact details.
“What will they look like? It’s hard to tell,” Milano said.
Back in 2009, the Federal Reserve Board developed HECM disclosure forms with a planned rollout date of fall 2010, but once the Dodd-Frank legislative reforms were enacted the same year, the plan fell by the wayside, Milano said. It’s unlikely that the CFPB will simply take the old forms and slap its own name on it, according to Milano, but officials could use the existing work as a blueprint for their plans.
“In my view, there stood room for some improvement, but that might be one area where they go back and use it as a starting point for ideas,” Milano said.
Milano expected an announcement of new disclosure forms sometime in the first two quarters of 2018, with a 60-day comment period to follow. Still, upheaval at the CFPB might throw a wrench into that timeline: Milano’s comments came before Richard Cordray announced his intention to leave the bureau by the end of November, and his rumored replacement has taken a far less supportive approach to the CFPB’s regulatory powers.
Written by Alex Spanko
