HUD Seeks Reverse Mortgage Non-Borrowing Spouse Revisions

On the heels of new guidance released in January on non-borrowing spouses of reverse mortgage borrowers, the Department of Housing and Urban Development is asking for more change in its 2016 budget request released this week. 

After outlining new guidance for lenders that allows them an option to reassign certain loans with non-borrowing spouses to HUD when the borrowing spouse has passed away, the department is requesting a change in language in the Home Equity Conversion Mortgage statute that would further address the issue. 

Among its proposals in the budget, released Monday, HUD seeks clarification on non-borrower spouse upon death of a HECM borrower. 

In its request, HUD asks for a revision to the National Housing Act that will clarify that the term “mortgagor” does not include the successors and assigns of the original borrower. 

It also asks that “it allows that the obligation to satisfy the loan is deferred until the death of the homeowner, the sale of the home, or other occurrence of other events specified in regulations of the Secretary.”

And “Finally, it provides for the Secretary, in his sole discretion, to provide for further deferrals.”

If granted, the requests would allow discretion to the HUD secretary on non-borrowing spouse cases, and would clarify the non-borrowing spouse language that has brought issue among numerous non-borrowing spouses in court cases over the last several years—many of which have been or are currently being pursued by AARP Litigation Foundation representation. 

AARP declined to comment on the budget request. 

HUD has recently provided several points of new guidance on non-borrowing spouses, including the January correspondence with lenders. In August, the department implemented a new protection for non-borrowing spouses under new case numbers that allows for them to defer loan repayment under certain circumstances when the borrowing spouse has passed away. 

Written by Elizabeth Ecker

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