Rep. Neguse Calls for Updates to Reverse Mortgage Foreclosure Guidelines for Victims of Major Disasters

The Colorado Congressman is calling on the Federal Housing Administration (FHA) to make these changes after hearing concerns from families impacted by the Marshall Fire.

Lafayette, CO — This week, Congressman Joe Neguse wrote to Federal Housing Administration (FHA) Commissioner Julia Gordon, requesting an update to the Home Equity Conversion Mortgage (HECM) occupancy requirements for borrowers following a natural disaster. The letter comes after Rep. Neguse heard concerns from constituents that mortgage companies were foreclosing on damaged properties owned by those impacted by the Marshall Fire because the individuals are not meeting the one-year occupancy requirement.

The one-year requirement within reverse mortgages states that if an individual does not reside within the premise of their home for more than a year–regardless of the reason–federal regulations allow the mortgage company to foreclose and sell the property. For families rebuilding after disaster, like the Marshall Fire, rebuilding takes 12 months at minimum and can last up to 24 months.

Congressman Neguse writes, “Over a year later, many of my constituents are still unable to return to their homes because they are either under construction or in the process of selling the property. Regardless of these special circumstances, individuals with a HECM reverse mortgage are at the risk of foreclosure on account of current Department of Housing and Urban Development (HUD) guidelines.”

The letter continues to state: “Natural disasters have the power to reshape our communities for years to come. Many families and senior citizens in my district are still recovering from the Marshall Fire. They should not face reverse mortgage foreclosures while acting in good faith to either rebuild or sell their property.”

Read the full letter HERE and below.

The Marshall Fire devastated communities across Colorado’s 2nd Congressional District, destroying over 1,000 homes and businesses in Louisville, Superior, and Unincorporated Boulder County. In the year since the Marshall Fire, Rep. Neguse emerged a leader in the fight against wildfires. He helped to secure over $11 Billion in federal funds related to helping families impacted by Marshall Fire. He introduced 3 bills to directly benefit Marshall Fire victims and led the House-passed Wildfire Response and Drought Resiliency Act, a monumental legislative package composed of over 50 stand-alone bills all focused on tackling wildfires, boosting firefighter pay, and funding resiliency and mitigation projects for communities impacted by recent climate-induced disasters.

March 15, 2023

The Honorable Julia Gordon Commissioner

Federal Housing Administration

451 7th Street SW

Washington, D.C. 20250

Dear Commissioner Gordon,

I write to request an update to the Home Equity Conversion Mortgage (HECM) occupancy requirements for borrowers following a natural disaster.

On December 30, 2021, the Marshall Fire devastated neighborhoods across Louisville, Superior, and unincorporated Boulder County – destroying over a thousand homes and businesses. This catastrophic disaster was the most destructive fire in Colorado’s history. Over a year later, many of my constituents are still unable to return to their homes because they are either under construction or in the process of selling the property. Regardless of these special circumstances, individuals with a HECM reverse mortgage are at the risk of foreclosure on account of current Department of Housing and Urban Development (HUD) guidelines. In fact, one Marshall Fire victim in this position has already been subject to foreclosure.

As you know, Congress authorized the Federal Housing Administration (FHA) to create the HECM program in 1988.The program was established following years of concerted efforts to address the financial predicaments of older adults while also creating an equity conversion product that would be widely accepted by the lending industry.

As we understand it, the federal government, through HUD, issues a series HECM requirements for borrowers and lenders. More specifically, a borrower must be at least 62 years of age, own the property, occupy the property as a principal residence, pay all current federal debt, and make timely payments. If these borrower requirements are not met, homeowners are often subjected to foreclosure and the lender seizing the property. According to the Government Accountability Office, most HECM defaults are due to borrowers not meeting occupancy requirements.

In the case of natural disasters and similar emergency situations, however, the temporary evacuation of communities is often necessary to protect human life and then to rebuild property following extensive damage. And yet, regardless of these unique circumstances, if HECM occupancy requirements were not met, some lenders apparently argue that federal regulations permit them to foreclose on reverse mortgages for damaged or destroyed property.

Natural disasters have the power to reshape our communities for years to come. Many families and senior citizens in my district are still recovering from the Marshall Fire. They should not face reverse mortgage foreclosures while acting in good faith to either rebuild or sell their property.

I greatly appreciate the urgency with which you responded to the Marshall Fire. I ask that you promptly update current guidelines and allow for a situational prohibition on foreclosures in this instance and in event of similar future disasters. Thank you in advance for your consideration.

Sincerely,

Joe Neguse

Member of Congress

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