HUD Should Stay Foreclosures During Shutdown

Charlotte Center for Legal Advocacy has joined housing advocates from across the country in signing on to a letter requesting that the U.S. Department of Housing and Urban Development place a hold on all judicial and non-judicial foreclosure activity during the ongoing federal government shutdown.

Read the full letter:

January 23, 2019
Ben Carson, Secretary
Brian Montgomery, Acting Deputy Secretary
U.S. Department of Housing and Urban Development
451 7th St., S.W.
Washington, DC 20410

Dear Secretary Carson and Acting Deputy Secretary Montgomery:

On behalf of the low-income clients and communities we represent, we urge the
Department of Housing and Urban Development (HUD) to issue a stay of all judicial and
non-judicial foreclosure activity on forward and reverse FHA mortgages pending
resolution of the federal government shutdown. The stay should include (1) the tolling of
applicable deadlines for all FHA borrowers, non-borrower spouses with reverse
mortgages, and servicers related to loss mitigation and other available relief, including
the deadlines set forth in HUD Mortgagee Letter 2015-15 regarding the Mortgagee
Optional Election (MOE) Assignment program; and (2) any action to call reverse
mortgage loans due and payable. Given that HUD’s National Servicing Center (NSC) and
other departments that play a critical role in loss mitigation1 are currently operating at
drastically reduced capacity, these measures are warranted to protect homeowners –
particularly elderly homeowners – from losing their homes.

Reverse Mortgages.
The Home Equity Conversion Mortgage (HECM) program was created to make it easier
for older homeowners to age in place by allowing them to borrow against their home
equity without risking displacement. HUD’s National Servicing Center is critical to this
mission. The NSC facilitates approvals of servicer requests for waivers and extensions in
connection with loss mitigation measures, provides guidance to HECM servicers, and
works directly with homeowners, housing counselors and advocates to resolve escalated
issues that frequently arise during the loss mitigation process. In the effective absence of
this critical resource and other agency operations, HECM borrowers facing foreclosure
cannot access key foreclosure alternatives that would otherwise be available to allow
them to avoid displacement and potential homelessness, including, for example:

  •  Repayment plans for defaulted property charges, which require approvals for
    extensions of foreclosure timelines from HUD;
  • At-risk extensions for borrowers over 80 years of age with serious medical
    hardships, which require HUD review and approval; and
  • Assignments under the MOE Assignment program, which must be reviewed and
    accepted by HUD and are currently subject to excessive delays.

For non-borrower spouses seeking assistance under the MOE Assignment program, the
unavailability of key HUD personnel presents a particularly difficult challenge. First, the
program currently includes extremely tight deadlines for completion of various
requirements by both the borrower and the servicer that will be impossible to meet under
HUD’s current skeletal operating conditions. Unless these deadlines are tolled during the
shutdown, many non-borrower spouses who otherwise qualify will be denied MOE relief
simply because of delays resulting from the shutdown. Second, the NSC and other HUD
departments play an indispensable role in the implementation of this relatively new
program. In addition to reviewing MOE assignment requests from servicers, HUD is
called upon to intercede in the majority of MOE assignment cases because of servicers’
frequent misinterpretation or misapplication of MOE rules.

In one current case in California, for example, an elderly woman is on the verge of losing
the home she inherited from her parents because the servicer erroneously denied her
MOE application, and the HUD representative at the NSC who was handling the matter
was furloughed 2 ½ weeks before the scheduled foreclosure sale. This surviving spouse’s
attorney was able to secure a brief postponement 36 hours before the scheduled sale, but
if the shutdown continues into February, she will likely lose her home despite qualifying
for assignment and deferral under the MOE program.

Allowing foreclosure activity on HECM loans to continue while key agency loss
mitigation resources remain unavailable to elderly homeowners would undermine the
program’s mission and result in irreversible losses to homeowners and to the Fund.

FHA Forward Mortgages
Borrowers with standard FHA-insured mortgages who have problems obtaining loss
mitigation assistance from their servicers will also face harm from severely limited access
to assistance from the NSC. Borrowers and their advocates regularly contact the NSC to
address situations in which loan servicers fail to follow FHA guidelines on foreclosure
alternatives. FHA has detailed eligibility requirements for borrower relief, including
specific rules about loan modification eligibility. Advocates often find that servicers
incorrectly deny borrowers for loss mitigation options, fail to correctly assess a
borrower’s options, and fail to properly calculate the terms of relevant options. In
addition, servicers often impose additional and unnecessary barriers to assistance.

When contacted about such errors, the NSC reaches out to servicers to address the
problems. While the NSC will generally not order servicers to take specific actions,
intervention by NSC and other HUD personnel can make a big difference in these cases,
helping save homes from unnecessary foreclosure and avoiding unnecessary claims
payments. Without a fully functional NSC, there will be unnecessary foreclosures as this
shutdown extends.

In order to avoid unnecessary foreclosures on borrowers who could have avoided
foreclosure but for the government shutdown, we urge the Secretary to issue a stay of all
judicial and non-judicial foreclosure activity on forward and reverse FHA mortgages,
including any action to call reverse mortgages due and payable and the tolling of applicable deadlines for loss mitigation and other available relief. The stay should remain
in place until the agency reopens and clears the backlog of loss mitigation and MOE
requests that is accumulating while the shutdown continues.

Sincerely,

Americans for Financial Reform Education Fund
BASTA, Inc.
Black Rock-Riverside Neighborhood Housing Services, Inc.
California Reinvestment Coalition
Center for Responsible Lending
Centro Legal de la Raza
Charlotte Center for Legal Advocacy
Chicago Volunteer Legal Services
Community Legal Services in East Palo Alto
Connecticut Fair Housing Center
Consumer Action
Consumer Advocates against Reverse Mortgage Abuse
Elder Law and Advocacy
Fair Housing Council of the San Fernando Valley
Health Justice Innovations, LLC
Housing Action Illinois
Housing and Economic Rights Advocates
Inner City Law Center (Los Angeles)
Jacksonville Area Legal Aid, Inc.
Law Foundation of Silicon Valley
Legal Aid Foundation of Chicago
Legal Aid Society of Milwaukee, Inc.
Legal Aid Society of Southwest Ohio, LLC
Legal Services of Northern California
Maryland Legal Aid
Mid-Minnesota Legal Aid
National Community Reinvestment Coalition (NCRC)
National Consumer Law Center (on behalf of its low-income clients)
National Disability Rights Network
National Fair Housing Alliance
National Housing Law Project
The Public Interest Law Project
Sargent Shriver National Center on Poverty Law
SeniorLAW Center (Philadelphia)
Western Center on Law & Poverty
West Side Neighborhood Housing Services, Inc.
Woodstock Institute

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