</p

Despite the categorization above, CFPBrnreports that most of the complaints arose out of borrower confusion about thernterms of their loan especially regarding denials for changing those terms.  The most common complaint, and one that camernfrom both borrowers and their adult children involved adding additionalrnborrowers to the loan in order to extend its term or allowing children tornassume the loan for an aging or deceased parent.  Often these complaints come about  after the death of a borrower whenrnnon-borrowing family members living in the home did not realize the loan had tornbe repaid until they were contacted by the lender.  CFPB said borrowers frequently fail tornunderstand that reverse mortgages are based on actuarial tables so adultrnchildren may retain the home only by paying off the loan or paying 95 percent of its appraised value. </p

Because the percentage of equity that canrnbe withdrawn is based on age (and thus life expectancy), couples frequently borrowrnonly in the name of the older spouse to increase the amount of the loan.  They then claim surprise that the loan must bernrepaid upon the borrower’s death.  Somernconsumers report that their loan originator falsely assured them they would be able to add the other spouse to the loanrnat a later date.  CFPB reports that arnrecent FHA change to HECM appears to have eliminated this problem for loansrnoriginated after August 4 2014 by incentivizing the inclusion of both spousesrnas borrowers.</p

Borrowers also claim they have been unablernto change the interest rate on their loan and feel they are being overchargedrnor that the rate on their variable rate loan has increased too rapidly.</p

Loan servicing is also a source of frequent complaints,rnmany centering on a lack of responsiveness.   While servicers are required to notify thernborrower or the borrowers heirs within 30 days that a repayment has beenrntriggered and told the options for paying the loan balance there are stillrnnumerous complaints about repayment problems. rnConsumersrncomplain that loan servicers and lenders do not provide a clear process for paying off the loan, others describe problems with the appraisalrnprocess such as lengthyrndelays, improperly performed appraisals, and inflated home values.</p

Many consumers complain that they wererneither unaware of their responsibility or unable to pay property taxes andrnhomeowners insurance, triggering defaults. rnThey describe unsuccessful attempts to halt foreclosure proceeding byrnpaying past due taxes or arranging payment plans other consumer complain thatrnloan servicers have determinedrnincorrectly that their taxes are past due.</p

Other complaints about servicers concernrntheir failure to keep accurate records or that they present obstacles when borrowersrnattempt to prevent foreclosure.  In thernlater cases consumers complain servicers lose documents, do not respond tornquestions or requests, or fail to halt improperly imposed foreclosurernproceedings.</p

CFPB notes that servicing problemsrnexacerbate many of the other problems that borrowers and their familiesrnexperience with reverse mortgages.</p

HUD hasrnissued more than 10 policy changes to the HECM program since CFPB startedrnreceiving complaints.  Problems with taxrnand insurance payments prompted the change in financial assessments that goesrninto effect next month and other changes, as mentioned above, affect survivingrnnon-borrowing spouses although those who obtained reverse mortgages prior tornthe change may continue to encounter difficulties.  </p

CFPB concludes that for millions of olderrnAmericans, especially those without sufficient reserves for retirement a homernequity loan could help them achieve economic security later in life.  To this end it is essential that the terms,rnconditions, and servicing of reserve mortgages be fair and transparent so thatrnconsumers can make informed decisions regarding their options.  </p

The Bureau makes three suggestions forrnpersons having or seeking these loans:</p

1.      Verify who is onrnthe loan and if there is more than one borrower check with the servicer to makernsure its records on the matter are accurate.</p

2.      If the loan wasrntaken out in the name of only one spouse make plans for the non-borrowingrnspouse.  Check with the servicer to seernif that party can qualify for a deferral in the event of the borrowing spouse’srndebt.  If there is enough equity,rnconsider taking out a new reverse mortgage in the names of both spouses.  Consider retiring the reverse mortgage with arntraditional mortgage even if other family members need to cosign.  If it will be necessary to sell the home makernplans for that eventuality. </p

3.      Talk to yourrnchildren and heirs – make a plan for any non-borrower family members living inrnthe home</p

Attorney Barbara S. Mishkin, commenting about the CFPB report on Ballard and Spahr’s blog, says that its concluding comment, that the terms, conditions, and servicing of these loans must be fair and transparent should be taken as warning that the CFPB is “likely to consider imposing additional disclosure and other requirements on reverse mortgages.”

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.