Foreclosure Confusion & Media Fallout

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HECM loan terminations and ‘foreclosures’ source of recent negative press coverage

Let’s face it. Foreclosure is an ugly and scary word. Unfortunately, it’s the same word that is commonly used when a Home Equity Conversion Mortgage is terminated- often when the loan balance exceeds the home’s value.

Additional resources:

| Dan Hultquist article: Can a foreclosure occur with a reverse mortgage? |
| USA Today HECM foreclosure map | NRMLA response to USA Today article |

1 comment

James E. Veale, CPA, MBT July 15, 2019 at 5:27 am

While we might hate to see the word foreclosure used to describe the legal process by which lenders obtain collateral due to uncured defaults, that is the only word for it under law. The legal word appears to be a legal term coming to us through English common law. The word itself with its various meanings seems to find its roots about 770 years ago.

The term HECM was invented almost yesterday by way of comparison. HECMs have little precedence under any law while the legal process known as foreclosure has been with us for centuries. So weighing it on the balance, maybe we should actually “educate” through our marketing that foreclosure with a HECM caused by death of the last surviving borrower is sometimes the best means for heirs to get rid of property they do not want to own.

By the way there are not just two kinds of HECM foreclosures. There at least six types of defaults that can occur with a HECM. The first two were again 1. due to the death of last surviving borrower and 2. untimely payment to property taxes or insurance. Then come foreclosures through 3. nonpayment of other property charges, 4. collateral not being maintained in a structurally sound condition, 5. living away from the collateral for more than six months out of the calendar year, and 6. being out of the collateral for more than a year for medical need.

Perhaps there is room for another type of foreclosures and that is “foreclosure without eviction.” There are times when that will not get what we wanted either but should at least pointed in the right direction.

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