Key facts
- Benutech's analysis of 35,000 reverse mortgages found widespread title record mismatches.
- Over 11% of loans had severe title discrepancies, with nearly 11.6% listing an active borrower not on the title.
- More than 11% of loans had absentee tax mailing addresses, indicating the property tax payer did not live there.
- Approximately 4% of loans had public death affidavits, with servicers unaware of the borrower's passing.
- Florida and California showed higher rates of title variations at 29.4% and 23.3% respectively.
- Super-lien laws in some states allow HOAs to foreclose and wipe out other loans, posing a risk to servicers.
Brian Fox, chief revenue officer at Benutech, has identified a significant blind spot in reverse mortgage servicing, revealing widespread discrepancies between title records and actual property ownership or borrower status. An analysis of nearly 35,000 active reverse mortgages by Benutech found that many servicers are unaware of critical changes, such as unrecorded title transfers, the addition of new owners, or even the death of a borrower.
Benutech's proprietary national property data file, updated daily, was used to compare against existing servicing portfolios. The study found that while two-thirds of loans (approximately 23,000) had matching ownership and borrower information (an A grade), a substantial number did not. About 10.42% of loans (over 3,600) received a D grade for significant discrepancies, often related to unreported transfers like those to heirs or via quitclaim deeds. Nearly 4,000 loans, or 11.56%, received an F grade because an active borrower was not listed on the current title.
Further analysis revealed that over 11% of loans had absentee tax mailing addresses, meaning the individual responsible for property taxes did not reside at the property. Additionally, about 4% of loans had public death affidavits on record, indicating the borrower had passed away without the servicer's knowledge. States with high retiree populations, such as Florida (29.4%) and California (23.3%), showed particularly high rates of title and mortgage record variations.
Fox highlighted two cases of F-graded loans where properties had been sold years prior, with servicers remaining unaware until litigation was pending or nearly pending. These situations can be exacerbated by "super-lien" laws in some states, which allow Homeowners Associations (HOAs) to foreclose and potentially wipe out other lienholders, including mortgage lenders, for unpaid dues. Information from First American Data & Analytics indicates that 20 states have such laws.
Benutech suggests that real-time monitoring services, like its PortfolioShield, can help lenders and servicers identify unreported ownership changes, occupancy status, trust conveyances, and other risks that could impact their portfolios and prevent unnecessary losses.