HUD Revises HECM Policies To Help Eligible ‘Non-Borrowing Spouses’ Stay In Their Homes

Posted by Patrick Barnard on June 12, 2015 No Comments
Categories : Residential Mortgage

Thanks to revisions to the Federal Housing Administration's (FHA) policies pertaining to Home Equity Conversion Mortgages (HECMs), lenders now have more options for allowing eligible ‘non-borrowing spouses’ to remain in their homes following the death of the last-surviving borrower.

Last year, FHA amended its HECM policies to allow for the deferral of foreclosure, or ‘due and payable status,’ for certain eligible non-borrowing spouses for case numbers assigned on or after Aug. 4, 2014.

Now, the FHA is allowing for deferral on eligible HECMs issued before Aug. 4, 2014, the agency says in a press release.

Under FHA's revised policy, lenders will be allowed to proceed with submitting claims on HECMs with eligible surviving non-borrowing spouses in several ways: By electing to assign the HECM to HUD upon the death of the last surviving borrower, where the HECM would not otherwise be assignable to FHA solely as a result of the death of the borrower (the Mortgagee Optional Election Assignment); by allowing claim payment following sale of the property by heirs or estate; or by foreclosing in accordance with the terms of the mortgage and filing an insurance claim under the FHA insurance contract as endorsed.

As per HUD's press release, following the death of a borrowing spouse, a non-borrowing spouse may remain in the home provided that the lender or servicer agrees; the reverse mortgage was assigned an FHA case number prior to Aug. 4, 2014; they are current on property tax and insurance payments; they maintain the property under the terms and conditions of the HECM; and they were legally married to the borrowing spouse at the time of the loan closing, among other stipulations.

Peter Bell, president of the National Reverse Mortgage Lenders Association, applauded the revisions to HUD's HECM policies.

‘As the national voice of the reverse mortgage industry, NRMLA appreciates today's guidance from HUD that resolves longstanding concerns about the responsible treatment of non-borrowing spouses,’ Bell says in a statement. ‘This issue has perplexed homeowners, lenders and housing counselors for years, and it is a relief to have clarity.’

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