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M.O.E. An Alternative to HECM Foreclosures

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New Policy Gives Some NBS Protections

reverse mortgage newsTo foreclose or not foreclose. That is the question. MOE. Who is Moe? Not a person but rather an new and important acronym Mortgagee Optional Election.

This monumental policy change comes in the wake of several notable lawsuits brought against the Federal Housing Administration (FHA) and reflects the agency’s desire to close the door on further displacement of younger non-borrowing spouses. Let me begin by saying that this policy is somewhat complex and we will only be covering the primary guidelines of this new policy. The Mortgagee Optional Election or MOE provides lenders with an alternative to foreclosure of the property upon the death of the last surviving borrower provded a number of requirements are met.

First, two choices are presented: proceed with foreclosure in accordance with the HECM contract or utilize the MOE assignment. The deferral period in the Mortgagee Optional Election assignment is the time period following the death of the last suriving borrower…

Download a transcript of this episode here.

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11 Comments

  1. M.O.E. and all the other “laws” that have been invented over the last three years have complicated the Reverse mortgage and its benefits as originally intended.President Reagan instituted a financial product that was fair and equitable to the borrower and the investor and lender. Why do the thieves always wait in sheep clothing to devour the sheep?
    I was a series 7 financial adviser with Prudential Securities and American International Group for 30 years and left because I could not trust the products offered 15 years ago and now this after I had great trust and faith in the RM. I am turning in my License. I have no more faith in the product.

    • Malcolm,

      Something has to be done. HUD is wrong about the displacement protection due non-borrowing spouses and will not do the right thing.

      In reaction to its loss at the Court of Appeals and the certain reprimand it will receive at the Supreme Court, HUD has been busy creating Mortgagee Letters which cut out the displacement protection rights it is willing to protect for a limited number of surviving, non-borrowing spouses and throwing the rest away. Instead of facing a Congress which is just waiting to reprimand it for its failure to manage the MMI Fund especially the HECM portion and HUD’s failure to protect the rights of seniors, HUD is acting like a adolescent who will face rebuke for his/her own misdeeds.

      Who disagrees that the law as it is will not create a financial fiasco for the MMI Fund but that is no defense for both not enforcing the law AND not going to Congress for over a quarter of a century to get a more realistic policy in place. While the industry generally and foolishly attacked non-borrowing spouses for seeking the displacement protections provided under the law we should have been encouraging these seniors forward and at the same time encouraging HUD to get the law changed.

      Yeah, we were duped by both HUD and lenders into parroting what it is they wanted us to say was true when they knew it was not, but that shows how foolish most of us were for so long in not reading the law. When I finally read the law 7 years ago and considered it, I was so furious that I complained to the HUD most senior person I knew at that time and surprisingly that person agreed that non-borrowing spouses had displacement protections under that provision.

      While I am angered by the hubris response of HUD, I am furious about how our industry treated those seniors who sought their rights in the courts. Accusing them of freeloading, greed, and other misdeeds was irresponsible and full of bias. We need to denounce the false accusations and prior and current policies of HUD toward non-borrowing spouses and encourage HUD to get the law changed the right way in Congress so that we are not diddling around with how 12 USC 1715z-20z(h)(3) applies to the some Mortgagee Letters but not parts of another, etc. for the next 25 years.

      HUD needs to grow up, act its age, and get to Congress for a retroactive rewrite of 12 USC 1715z-20(j) which says what it is HUD’s policy has been all along.

  2. Shannon – you normally do a great job !

    On this video, you went over a new and complicated topic much, much too fast – no new net learning !

    Best Wishes,
    Dave nute

    • Dave,

      I can appreciate that the complexity of this topic warrants much much more time. That said I am challenged to condense complex issues into our short format. From time to time I myself have to watch something a few times to fully absorb the information. All the best. Cheers…

      • Shannon,

        I love how short you can be but this is one time it seemed to backfire. Sometimes the subject matter does not allow for being short.

        So even though I understand your rationale and it is extremely reasonable, this topic should probably be readdressed.

        Keep up the good work.

  3. Come on, folks – Shannon is doing us a service, within the constraints of his short video format, by bringing something to our attention that obviously warrants further investigation.

    He’s done his job – now let’s go do ours.

    • Jim,

      Constructive criticism is just that. Unfortunately many people do not understand it or how to use it for good. While Shannon is not perfect (sorry), he does seem to take constructive criticism quite well and does better because of it.

      So, Jim, while you might not like criticism about what you do, other people should be allowed their right to ask for something better.

      • Sorry, Critic – I did not realize that other people’s “right to ask for something better” trumps my right to suggest that, in this case, Shannon did an excellent job within the constraints of his format and if we want a more detailed treatment of the subject we should seek it in a different forum.

        • Jim,

          Interesting that you bring up something trumping something else. Perhaps we should get together for some Texas Hold’em.

          You did not say that the segment was “perfect.” Being excellent leaves room for improvement.

          All I am saying is that the segment in question was not up to Shannon’s general level of presentation particularly how quickly he wound up the balance due test.

          OK?

  4. Yes, I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the Kingdom of God.”
    See you all in heaven! lol…
    Our industry seems to believe that the employees of HUD who dream up all of our new and improved rules and regulations are smarter, better informed, more familiar with the nature of this product and its implementation than the rest of us…..NOTHING could be further from the truth. There was a time when those of us in this industry insisted upon having a voice and a legitimate place at the table during deliberations about the best path forward in this program……Now, our industry seems to cow to these folks and consistently fails to insist upon a place at the table BEFORE all of this nonsense is put into place.
    The scariest part is some of our most influential voices honestly believe that this program is headed in a positive direction…..poppycock.

  5. I surmize more litigation to come, if no serious changes are made to protect the non-borrowing spouse in her or his home.


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