After a victim of a Colorado wildfire nearly lost his home to a reverse mortgage foreclosure, everyone from state and federal lawmakers to the U.S. Department of Housing and Urban Development (HUD) chimed in on the issue.

And, a member of the U.S. House of Representatives is now saying that HUD has agreed to change the practices that govern mortgage foreclosures in the areas impacted by the Marshall Fire.

New action from HUD

According to an announcement by U.S. Rep. Joe Neguse (D), who represents Colorado’s 2nd Congressional District, HUD has “taken action” to prevent foreclosures for victims of the Marshall Fire.

Neguse first turned his attention to the issue in March, when local media highlighted the story of 80-year-old resident Ed Sharp, who lost his home in the fire. Sharp’s loan’s servicer twice attempted to foreclose on the home prior to HUD and Rep. Neguse intervening. Now, HUD has reportedly changed its approval requirements in areas impacted by the fire.

“HUD flagged all properties located within Louisville, Superior, and unincorporated Boulder County in their servicing system to require additional HUD approval before Due and Payable actions are taken,” according to an announcement from the representative’s office.

As of Tuesday, HUD has not announced rule changes related to this issue. Requests for comment sent to Rep. Neguse’s office and representatives of HUD were not immediately returned. A representative of the National Reverse Mortgage Lenders Association (NRMLA) declined to comment.

“It was unconscionable that families impacted by the Marshall Fire would be at risk for foreclosure because they are unable to inhabit a home that is literally no longer standing,” Neguse said in the announcement.

Neguse also praised his staff for identifying the issue and helping to facilitate a solution, and lauded HUD for its receptivity to outreach efforts.

“I am proud of my team, who took decisive action to rectify the issue, and am grateful that the Department of Housing and Urban Development listened to our calls and decided to take action to protect those not only impacted by the Marshall Fire, but by natural disasters across the nation,” he said.

Recent history

After a new manufactured home was placed on Sharp’s property in February, the homeowner and his family were informed of the foreclosure decision by Boulder County Treasurer Paul Weissmann, who said the foreclosure was initiated due to Sharp allegedly failing to meet the Home Equity Conversion Mortgage (HECM) program’s occupancy requirement.

This led Sharp and his family to be featured in a local TV news story, which caught the attention of his state-level representative, Kyle Brown (D). Brown, in turn, said that he would introduce legislation to bolster foreclosure protections for victims of natural disasters.

The news story also led residents to reach out to the office of Rep. Neguse, who in March sent a letter about the issue to FHA Commissioner Julia Gordon.

The following month, the servicer of the impacted loan attempted to reinitiate the foreclosure, according to the family, causing a response from Rep. Neguse and FHA that ultimately resulted in the second foreclosure being rescinded.

“It makes no sense, it’s nonsensical to suggest to those who are impacted by the Marshall Fire who’ve literally lost everything that now they would be compelled to have their home foreclosed on because of an occupancy requirement that obviously is not operative when they can’t live in the house itself because of damage as a result of the Marshall Fire,” Neguse said in April.

“FHA recognizes the situation described in Representative Neguse’s letter should not have occurred,” a HUD spokesperson said in April. “When the matter was brought to our attention, FHA immediately contacted the servicer, who in turn halted any foreclosure-related activity.”

HUD said it was examining ways to curb these types of foreclosure issues for reverse mortgage borrowers affected by natural disasters.

“FHA is implementing new safeguards in its technology systems to ensure that homeowners with Home Equity Conversion Mortgages do not face foreclosure as they seek to recover and rebuild following disasters,” the spokesperson said. “In addition, FHA is working on further guidance for the servicing of HECM loans on properties impacted by disasters.”