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More Relief for HECM Non-Borrowing Spouses

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Mortgage Daily

                                                 January 29, 2015

More changes to servicing policies on government-insured reverse mortgages are intended to provide relief for surviving spouses who weren’t on the loan when it originally closed.

In April 2014, the Department of Housing and Urban Development issued Mortgagee Letter 2014-07 implementing an alternative interpretation of the National Housing Act.

The change was intended to benefit the surviving spouses who didn’t originally join the borrowers in signing on a home-equity conversion mortgage.

Impacted loans included those with Federal Housing Administration
case numbers assigned after Aug. 3, 2014.

HUD announced additional relief on Thursday in Mortgagee Letter 2015-03.

According to the notice, when a borrower dies – a new FHA HECM policy
gives mortgagees the option to delay calling HECMs due and payable when there is an eligible surviving non-borrowing spouse.

The latest policy revision applies to HECMs with case numbers issued prior to April 4, 2014.

The move is intended to provide
eligible surviving spouses with the opportunity to remain in the home even though they weren’t on the FHA-insured loan.

In order to collect on an FHA claim, lenders will need to allowing the claim payment to occur following sale of the property by heirs or estate; foreclosing in accordance with mortgage terms and filing claim as endorsed; or  assigning the HECM to HUD upon the death of the last surviving borrower.

“By electing the Mortgagee Optional Election Assignment, lenders will be permitted to modify their FHA mortgage insurance contracts to permit assignment of an eligible HECM to HUD despite the HECM being eligible to be called due and payable as a result of the death of the last surviving borrower,” HUD said.

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