HUD Outlines New Reverse Mortgage Non-Borrowing Spouse Guidance

In the latest response by the Department of Housing and Urban Development to an ongoing series of lawsuits filed on behalf of non-borrowing spouses of reverse mortgage borrowers, the agency has issued two new determinations as well as new guidance to lenders and servicers. 

The AARP Litigation Foundation has represented the plaintiffs in the cases. 

HUD recently responded to a judge’s order that the agency provide relief to two plaintiffs in Bennett v. Donovan, stating that it was not able to provide any relief within the confines of its abilities under the law.

Now, HUD is offering some answers for the plaintiffs and potentially to those who are in similar situations, according to information distributed by the agency this week. 

In reference to a determination in regards to the four named Plaintiffs in Plunkett v. Donovan, HUD specifies that lenders holding the loans at issue in that case, as well as the two in the Bennet v. Donovan case, have the option of electing to assign those specific Home Equity Conversion Mortgage Loans to the HUD provided certain parameters are met, as specified by HUD. 

There could also be implications for additional loans in the future, HUD said. 

“FHA, through its normal administrative processes, is reviewing its policies to determine the possible application of such an option with respect to similarly situated Non-Borrowing Spouses,” the memo states. 

The agency is also offering an indefinite extension option for current non-borrowing spouses who are facing foreclosure due to the passing away of their spouses. HUD previously had granted two possible extensions to borrowers facing this situation. 

“In order to allow FHA to complete this review and, if appropriate, to proceed with any appropriate policy announcement through its normal administrative processes, FHA is exercising its discretion to provideHECM Mortgagees with an indefinite extension of time in which to take first legal action to commence foreclosure and to comply with reasonable diligence timeframes,” HUD writes. 

The new extension option will be available as of June 25, until additional guidance is provided through mortgagee letter or a similar statement. 

The agency is stressing the criteria that must be met as outlined in its memo including PLF requirements, marital requirements, property requirements and loan status, among others. 

“Any such request for this extension is optional and within the Mortgagee’s sole discretion,” HUD states. “Further, determining whether the above conditions are met is also within the Mortgagee’s discretion.”

View the full guidance.

Written by Elizabeth Ecker

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