In the reverse Mortgage industry, the issue of what happens to surviving non-borowing spouses has always been a hot topic well before recent rule changes that now allow these individuals to remain living in the home even following the death of their reverse mortgage borrowing spouse. Now in California, new legislation calls for similar protections to be afforded to widowed spouses and other survivors who assume home ownership responsibilities when the primary mortgage holder passes away.
The Homeowner Survivor Bill of Rights (Senate Bill 1150) closes a loophole in California state law that does not provide surviving spouses and children important protections against foreclosure that are available to other homeowners.
Grieving family members who have the financial ability to remain living in their homes following a loved one’s death should not be forced to face the added stress of a lender’s red tape, said Sen. Leno (D), who introduced the bill alongside Sen. Cathleen Galgiani (D).
“Widowed spouses are being consumed by a labyrinth of processes in an attempt to assume or modify existing home loans after the primary mortgage holder passes away,” Leno said in a prepared statement. “This has led to preventable foreclosures and worsened the suffering of families already thrown in personal crises.”
The Bill, which will be heard in state Senate policy committees this spring, clarifies the responsibilities of a mortgage lender when a borrower dies and passes the home along to a survivor who wishes to assume the home loan.
The legislation ensures that heirs receive accurate information about loan assumption and foreclosure prevention programs, and also gives survivors a single point of contact with the lender and the ability to simultaneously apply for loan assumption and modification.
SB 1150 builds upon California’s previous legislation, the Homeowners’ Bill of Rights (HBOR), which passed in 2012. This bill requires a single point of contact at a lending institution and prohibits “dual-tracking,” a practice where lenders foreclose on a home while the owners are simultaneously seeking a loan modification.
Loan servicers argue that surviving family members who are not named on the loan are not covered by HBOR. Meanwhile, survivors report that lenders refuse to communicate with them or fail to provide factual information about loan details and foreclosure avoidance programs.
Older adults, particularly senior women, are harmed by California’s lack of homeowner protections because they tend to live longer than men by an average of seven years, according to Hene Kelly, legislative director at the California Alliance for Retired Americans—one of the bill’s sponsors.
“There are more than 3 million senior homeowners in California, and as our aging population continues to grow, so does this problem,” Kelly said in a written statement.
Nonprofit housing counselors and legal services attorneys in California report that the majority of their clients who are surviving homeowners have had difficulties working with mortgage lenders and faced foreclosure, according to the Office of Sen. Leno.
In the past three years, attorneys from the Housing and Economic Rights Advocates say they have helped nearly 50 people caught in such predicaments.
“While we’ve helped them, we know many more are falling through cracks because they don’t have access to an attorney,” said Maeve Elise Brown, executive director at Housing and Economic Rights Advocates.
The California Reinvestment Coalition (CRC), an organization of 300 nonprofit membership organizations focused on improving the economic vitality of low-income communities and communities of color, and also another one of SB 1150’s sponsors, says the legislation is just “common-sense.”
“We can’t allow the status quo to continue,” said Kevin Stein, associate director at the CRC. “SB 1150 is a common-sense solution that would make a world of difference for families who are going through tough times.”
The CRC has been somewhat active in the foreclosure of non-borrowing spouses, particularly as it applies to reverse mortgages.
In October 2015, the organization filed a lawsuit against the Department of Housing and Urban Development over a stalled Freedom of Information Act request regarding the impact of foreclosure on widowed spouses of reverse mortgage borrowers.
The lawsuit challenged HD’s denial of a fee waiver for the FOIA request, which the CRC filed in 2014 after being contacted by widowed homeowners and advocates in the context of its protest agains the $3 billion acquisition of OneWest Bank by CIT Group (NYSE: CIT).
“We are hopeful this lawsuit will be resolved quickly so the fee waiver is granted, the data we seek in our FOIA request is produced by HUD and the public is granted access to this important information,” Stein said upon the lawsuit announcement last October.
There has been no word from HUD nor the CRC on any further developments in the lawsuit.
Written by Jason Oliva
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