HUD Rescinds Recent Rule on Reverse Mortgage Non-Borrowing Spouses

The Department of Housing and Urban Development (HUD) is officially rescinding a previous mortgagee letter that would have given reverse mortgage lenders the option to delay foreclosure of non-borrowing spouses via assigning the loan to HUD.

Thursday, HUD issued Mortgagee Letter 2015-12, effectively revoking the guidelines laid out in ML 2015-03 detailing the Mortgagee Optional Election (MOE) Assignment of Home Equity Conversion Mortgages (HECMs) assigned prior to August 4, 2014. Effectively immediatly, lenders will also have a new option to extend foreclosure proceedings for up to 60 days in certain cases.

Under the previous guidelines, lenders would have been able to assign eligible HECMs to HUD upon the death of the last surviving borrowing spouse, thereby allowing surviving spouses to remain in the home despite their non-borrowing status.

Lenders would have also had the option to assign the HECM to HUD upon the death of the last surviving borrower through the “MOE.”

For any HECM with a case number issued before August 4, 2014 with a non-borrowing spouse, HUD is now providing HECM lenders with an additional 60-day time extension in which to take first legal action to begin foreclosure, and to comply with reasonable diligence timeframes for such reverse mortgages.

Lenders may immediately elect to begin using this extension, stated HUD in a memo on the HECM timeframe extensions.

“The request for an extension is not conditioned on the continued pursuit of foreclosure or the marketing of the property,” HUD stated in the memo. “The mortgagee’s request for an extension is effective when made and FHA will not be providing any specific approval for this extension.”

To elect an extension, HUD directs mortgagees must prepare a detailed Extension Request on their company’s letterhead, on which they must obtain an authorized loan servicing manager’s signature.

The move to rescind ML 2015-03 arrives one day after a notice in the Federal Register on HUD’s response to a number of public comments on the rule solicited by the Federal Housing Administration between February 6-9.

Written by Jason Oliva

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