payoff quote on a defaulted loan where the borrowers have passed away is going to be a minimum of five business days or longer,” she says. “Otherwise, they’re rapid, depending upon which servicer. Sometimes you can get it the same day.” Borrowers also should know that a Life Expectancy Set Aside (LESA) to cover taxes and insurance cannot be canceled, even if it was set up voluntarily. “It cannot be changed,” she says. “Make sure when you’re accumulating the documentation that you understand that once that LESA is established, it’s like it is established in concrete.” If someone’s property taxes are suddenly dramatically reduced, the LESA cannot be adjusted. Getting Help When problems arise, borrowers can do a few things to rectify situations. For example, if occupancy becomes an issue, one borrower could move back into the property and certify occupancy. And if a borrower defaults because of unpaid taxes, insurance or homeowner association fees, they sometimes can get on repayment plans, Flynne says. And some local jurisdictions offer grant programs for people having financial problems, she points out, with HUD offering assistance to people who are 80 or older. LOs might be able to help borrowers by researching programs in their areas, she suggests. Borrowers must be careful about setting up trusts or otherwise transferring title after the loan is originated. If errors are made, such documents can be fixed but must be done before a borrower dies. “This typically comes up when somebody transfers their property thinking they’re doing end-of-life planning,” Flynne says. “They have to remain on the title to the property.” They should always submit the trust documents to the servicer to ensure they meet HUD requirements. Family members also should be told about their options after the borrower dies. While some families might opt to buy the house back, many do not want to keep it and need to understand what will happen, which might include foreclosure. Overall, the servicer’s role is to protect the investment, which is why all the requirements must be documented—from taxes and insurance to occupancy to upkeep. “When the taxes aren’t paid, they’re going to be notified,” she says. “They’re going to get many, many, many letters asking them to call us to figure out how we can get them on a repayment plan. Same thing with insurance. When insurance is coming up, they’ll get letters saying the insurance is coming due.” Borrowers are best served if they understand that process. “We track taxes, and we track for insurance, so we are going to know when they have not paid their taxes or renewed their insurance,” Flynne explains. “And because collateral is the only thing that represents the opportunity to repay this loan other than cash, we have to protect that collateral.” Additional Resources NRMLA offers these resources to help borrowers with the loan process: • “What You Need to Know About Your HECM After Closing” at nrmlaonline.org/ 2021/07/26/need-know-hecm-closing; and • “What Do I Do When My Loan is Due?” at nrmlaonline.org/2021/07/26/ what-do-i-do-when-my-loan-is-due. Other resources include: • Consumer Financial Protection Bureau (CFPB): “You have a reverse mortgage: Know your rights and responsibilities” at pueblo.gpo.gov/CFPBPubs/CFPBPubs. php?PubID=13459. • U.S. Department of Housing and Urban Development (HUD): 1. portal.hud.gov/hudportal/HUD?src=/ program_offices/housing/sfh/hecm/ hecmhome; 2. hud.gov/topics/information_for_ senior_citizens; and 3. HUD Counseling (800) 569-4287 or hud.gov/program_offices/housing/sfh/hcc. • U.S. Treasury’s Homeowner Assistance Fund: ncsha.org/homeowner-assistance-fund/. REVERSE MORTGAGE / SEPTEMBER–OCTOBER 2023 31
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