Guttentag Questions the Definition of a HECM ‘Foreclosure’
“Whoever controls the language controls the debate”. The purported ‘epidemic’ of reverse mortgage foreclosures has long been a staple for major media outlets to attack the reverse mortgage as a risky and dangerous loan. Closer to home, the incidence of HECM foreclosures has been often cited as one justification for increased restrictions, product reengineering, and the financial assessment underwriting guidelines.
The media loves a good drama. Find a villain and add some emotional tension and you have a headline that is click-worthy. Such a scenario played out in a recent article on Bloomberg.com entitled “Mnuchin’s Reverse Mortgage Woes Blemish Record of Treasury Pick.” Jack Guttentag, aka the Mortgage Professor, was intrigued. The headline is timely since Steven Mnuchin was recently announced as president-elect Trump’s pick for Treasury Secretary. Mnuchin’s blemish in the article centers on his acquiring of IndyMac Bank in 2009 and with it Financial Freedom. Now we can see the ‘reverse mortgage’ connection that Bloomberg hints may point to alleged unethical business practices. Financial Freedom “has carried out 16,220 foreclosures since 2009, or about 39 percent of the country’s reverse mortgage foreclosures, according to HUD data obtained by the California Reinvestment Coalition…” Guttentag was skeptical that one lender could account for such a large percentage of HECM foreclosures.
What ‘foreclosure’ really means
Skeptical, Guttentag researched for the total number of HECM foreclosures since 2009. He uncovered a report provided by the agency to a consumer group in response to a freedom of information request. Since April 2009, there have been 41,237 reverse mortgage foreclosures accounting for roughly 4% of all…