By Rusty Bradshaw
Sun Cities home owners hoping to get the ban on FHA reverse mortgages lifted through efforts by the federal government will be disappointed, according to a local task force trying to find a resolution to the issue.
“HUD officials are telling us they are not going to do anything about it,” said Liz Rechia, West Maricopa Association of Realtors Governmental Affairs director.
Reverse mortgages began being rejected more than a year ago when HUD officials changed their regulations, partly calling for any fees charged to homeowners be used for community benefit.
The local task force — whose members include four Sun City residents, one Sun City West resident, five real estate professionals and a social worker — formed last year to see what could be done to lift the reverse mortgage ban. The group has been working on two levels, negotiating with Housing and Urban Development and Fair Housing Administration officials, and with the Sun Cities recreation centers organizations to get regulation alterations that will allow the reverse mortgages.
With the federal agency indicating there are no plans to adjust its regulations, the task force is now focusing its efforts locally. The task force wants to convince rec centers officials to amend their bylaws to waive their preservation and improvement (Recreation Centers of Sun City) and asset protection fee (Recreation Centers of Sun City West) — both $3,500 charged for every property transaction — in cases of foreclosure or deeds in lieu of foreclosure. Rec centers officials in both communities have so far refused to make those amendments citing a loss of revenue. They said losing the preservation fees would make it difficult to afford capital improvements without creating debt or creating a special assessment to property owners.
“People need to realize the cost to RCSC if we don’t have the PIF,” said Rich Hoffer, then RCSC board president, during a Nov. 8 member/director exchange meeting.
“I had a meeting with RCSCW officials and they said they would not put in writing anything that waived their preservation fee,” said Michael Thomas, VIP Mortgage originator, during a Feb. 8 task force meeting. “They said it would be a loss of income.”
Jan Ek, RCSC general manager, explained in the Nov. 8 exchange meeting that RCSC’s PIF qualifies as going back into the community according to the HUD regulations, and RCSC officials have submitted all the documents to clearly show that.
“But we are dealing with the federal government and we just keep getting pushed up the ladder of the bureaucracy,” she said.
Ms. Ek said RCSC officials were told the reverse mortgage ban will be fully lifted by year’s end.
“I am not confident that will happen,” she said in the November meeting.
In addition to reverse mortgages, the federal agencies that insure loans are beginning to expand their tight-fisted regulations about loans.
Vicki Frye, Frye Realty owner, said Fanny Mae and Freddie Mac officials are now working on changing their regulations to ban loans for properties in associations that have “no rent” rules.
“They are looking at mirroring their regulations with those of HUD and FHA,” she said.
Austin Fontenot, president of one Sun City condo association, believes there may be some effects of that showing up already as one tenant in his association was denied a refinance loan because the association has a “no rent” rule.
Ms. Rechia believes this will eventually affect home sellers with existing FHA loans. She also believes this will affect the rec centers through loss of income not just with the preservation fee but also with annual assessments as homes sit empty for years because sellers cannot find buyers who can get FHA-insured loans.
“They won’t be getting fees on more and more homes as time goes by and they’ll lose even more revenue then just a small percentage of their preservation fees,” she said. “But that could be three or more years down the road.”
Mr. Thomas said RCSCW officials fear is that if they amend the bylaws to waive the fee for specific circumstances, the government will force them to eliminate the fee altogether.
Ms. Rechia said there is a model for getting rec centers’ bylaws amended to allow a preservation fee waiver the task force suggests. She said Corte Bella and Westbrook Village officials already amended their documents.
“But any such effort must come from the residents, not us,” she said. “That takes time and endurance.”
Mr. Thomas said the task force must show residents the reverse mortgage ban extends past those loans.
“This is best if handled by the community, rather than having the government do it,” Ms. Rechia said.
She added WEMAR officials are now developing materials to help educate residents about the situation.
One of the reasons HUD officials are reluctant to make changes to its regulations is they do not want to risk going below their congressionally mandated reserve funds again. HUD nearly exhausted its reserves after the housing bust of 2009, according to Ms. Rechia.
“They just recently replenished those reserves and they don’t want to risk it again,” she said.