HUD Expands HECM Non-Borrowing Spouse Protections

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MORTGAGE EXPERT
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Spouses of deceased borrowers on government-insured reverse mortgages who weren’t on the original loan have been provided more protection.

The Department of Housing and Urban Development
 issued Mortgagee Letter 2014-07 in April 2014 that had an alternative interpretation for the National Housing Act benefiting surviving spouses who weren’t originally on a home-equity conversion mortgage.

Then, this past January, HUD issued Mortgagee Letter 2015-03 allowing mortgagees to
delay calling HECMs due and payable when there is an eligible surviving non-borrowing spouse.

That mortgagee letter impacted HECMs with case numbers that were assigned by the Federal Housing Administration after Aug. 3, 2014.

On Friday, HUD issued Mortgagee Letter 2015-12.

The latest update allows mortgagees the option of applying the change to HECMs that had case numbers assigned prior to Aug. 4, 2014.

By utilizing a
Mortgagee Optional Election Assignment, mortgagees can assign an eligible HECM to HUD despite the death of the last surviving borrower and regardless of the loan’s unpaid principal balance.

But in order for the non-borrowing spouse to remain in the property, the servicer must agree to it, the tax and insurance payments must be paid in a timely manner, and the property must be maintained as required by the terms and conditions of the HECM.

Other requirements include that the surviving spouse currently lives in the property and lived there during the duration of the borrower’s life and was married to the borrower when the loan closed (or engaged if a same-sex relationship in a state that doesn’t allow same-sex marriages but married prior to the borrower’s death).

In addition, the non-borrowing spouse must be able to obtain marketable title to the property within 90 days of the borrower’s death.

Mortgage Expert

Mortgage Daily Staff

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