Late last week, the Federal Housing Administration announced a new set of protections to apply to all eligible non-lending spouses (NBS) of Home Equity Conversion Mortgage (HECM) borrowers, expanding the range of qualifying criteria for such NBS and becoming a requirement eliminated for certain NBS to produce marketable property on the secured property; and change in qualification requirements for the NBS of borrowers who are forced to move out of the home for health reasons.
The last major NBS protection imposed by the FHA on HECM borrowers came in the fall of 2019, which received broadly positive reviews answer from the reverse mortgage industry and specifically from companies involved in maintenance. RMD received similar positive responses to the latest guidance from servicers and the Reverse Mortgage Industry Trade Association.
The service has often been a cause for concern for many reverse mortgage industry participants, analysts and observers. Therefore, the FHA and the US Department of Housing and Urban Development (HUD) have devoted additional attention to issues related to the reverse mortgage service broadly welcomed by such professionals in recent years. When the service agents were informed of the newly announced protection for eligible NBS, they generally responded with appreciation, as carried out by RMD.
“I think the service industry really appreciates that HUD essentially created a set of rules for all non-borrowing spouses to stay in their homes,” said Leslie Flynne, SVP, Reverse Mortgage Solutions (RMS) credit services at RMD. “The timeframes it takes NBS to meet the requirements are achievable and hopefully this will put an end to this very problematic problem.”
Others are a little more exuberant for HUD and FHA when it comes to addressing this issue, especially in the sense that there are hurdles that have not yet been addressed in relation to lending and that seem to have been moving.
“Celink applauds the HUD for implementing the much-needed positive policy change affecting both non-borrowing spouses and loan service providers,” said Ryan LaRose, chief client and industry relations officer, Celink, RMD. “The new regulations remove some of the more difficult hurdles for an eligible NBS to qualify for protection – and these changes should make the program easier and more effective for them.”
That being said, the new safeguards announced by the FHA are not exactly the proverbial “silver bullet” when it comes to propping up any reverse mortgage-related issues, as some unanswered questions deserve future attention from the HUD and FHA, explains LaRose. However, this is not said to diminish the visible progress that these latest regulations represent.
“There are still some areas that need improvement, such as: B. the difficult requirement that the NBS must provide an occupancy certificate of the death of the borrower within 30 days of the announcement of the death of the borrower (which may be too short in a very difficult time for the spouse), “he says.” However, these incremental improvements to the policy are a huge step in the right direction and provide a higher level of protection for the affected NBS. “
Answer from the association
The National Reverse Mortgage Lenders Association (NRMLA) also welcomes the attention of the HUD and FHA to reverse mortgage service issues through these guidelines, according to Steve Irwin, president of the association.
“NRMLA welcomes the guidelines listed in Mortgagee Letter (ML) 21-11,” Irwin told RMD in an email. “We have long advocated protecting NBS in cases where the borrower has had to move to a care facility, an issue that these guidelines are now solving. We also applaud the ministry’s efforts to use the Reverse Mortgage Stabilization Act to act quickly and smooth out any inconsistencies in the policies based on the date the case number was assigned. “
In general, the industry takes credit for the guidance contained in the latest mortgage letter, concluded Irwin.
“Our members and the customers they serve welcome these policy changes,” says Irwin.
The new ML provides four primary new protections for eligible NBS on a reverse mortgage transaction, including expanding the criteria by which a grace period begins for HECM loans with case numbers assigned on or after August 4, 2014, including a scenario where in which the primary The borrower resides in a health facility for more than 12 consecutive months, but the NBS has stayed at home.
The ML also extends the assignment criteria for Mortgagee Optional Election (MOE) assignments for HECMs with assigned case numbers In front Aug 4, 2014. New criteria include “HECMs that can be classified as due and payable under the terms of the original mortgage as the property is no longer considered a borrower’s primary residence based on the borrower’s residence in a healthcare facility for more than 12 consecutive months, ”says the ML.
A previous requirement that said an eligible NBS must establish a marketable title or other legal right to remain owned after the primary HECM borrower dies has been removed, according to ML. The agency states that while HECM mortgages can apply the new procedures immediately for all new HECMs, those who choose not to will have to implement the new procedures by September 3, 2021, or 120 days after the ML 21 is published . 11.