The Federal Housing Administration has released guidelines to help senior citizens with reverse mortgages who are facing foreclosure after falling behind on property taxes and home insurance premiums.
“We understand that some senior citizens have not paid their taxes or insurance for some time and may be at risk of losing their home,” FHA Commissioner David H. Stevens said Tuesday. “Today’s guidelines are designed to establish a clear framework that protects both the homeowner and the lender who participate in our reverse mortgage program.”
The U.S. Department of Housing and Urban Development allows lenders to make tax and insurance payments on behalf of their elderly clients from the borrower's available mortgage funds. But when the money is gone, the lender must advance funds to protect the FHA's interest and seek reimbursement from the borrower.
The FHA is reminding lenders that foreclosure should be a last resort when dealing with elderly clients. The agency is supplying lenders with sample letters to make sure borrowers understand that property tax and insurance are required expenses that must be paid even though the homeowner has paid off the mortgage.
HUD has also announced that it will provide nearly $3 million to housing counseling agencies to help elderly homeowners create repayment plans and address the issue, seeing alternative housing if necessary.
Some say the new guidelines are flawed. "This won't help them," said Susan Lagville, executive director of Housing Help Inc., a nonprofit housing counseling agency based in Greenlawn. "The only thing [the FHA] is offering is a repayment plan. But most seniors
don't have the money to repay it."
Another problem Lagville noted is that often when homeowners apply for a home equity loan they find the value of their home is much less than several years ago and refinancing is not an option.