The National Reverse Mortgage Lenders Association (NRMLA) has sent the US Department of Housing and Urban Development (HUD) a letter expressly requesting the Department to update the home equity conversion mortgage (HECM) loan documents and security tool, to meet the requirements of Non-Borrowing Spouse Protection (NBS) recently announced in a Mortgage Letter (ML).
In the comments submitted by the association, there are several proposed changes to the relevant documents, which revolve around a technical focus. The servicers have also asked for a written confirmation from the department that they can start implementing the newly announced changes before the relevant loan documents are updated in order to effectively avoid jeopardizing the insurance of the affected and relevant loans.
“[T]The maturity events in the HECM bonds and collateral instruments should be changed along with the language in the borrower and NBS related certificates of completion, if any, to remove the requirement for an NBS to establish a marketable title or other legal right to possession to expand the property and to extend the right to deferment not only to the time after the death of the borrower, but also if the borrower is not occupied in a health facility for more than 12 consecutive months, ”the letter says in part.
Provisions of ML
The corresponding ML, 2021-11, offers four primary new protections for eligible NBS in a reverse mortgage transaction, including the expansion of criteria starting a grace period for HECM loans with case numbers assigned on or after August 4, 2014, including for a scenario in the main borrower has been resident in a healthcare facility for more than 12 consecutive months, but the NBS has stayed at home.
The ML also expands the assignment criteria for assignments for the optional choice of Mortgageeers (MOE) for HECMs with case numbers assigned prior to August 4, 2014. The new criteria include “HECMs that are due and payable under the terms of the original mortgage due to the property no longer being a borrower’s primary residence because the borrower has been living in a healthcare facility for more than 12 consecutive months,” according to the ML.
In addition, the definition of a person who can be described as an “eligible non-borrowing spouse” has been expanded to include “the spouse of an HECM borrower who was assigned an FHA case number on the HECM loan prior to August 4, 2014” as several additional new criteria. Such newly eligible NBS may be spouses legally married to the borrower either through the death of the borrower or while the borrower moved to a healthcare facility.
This definition also includes an allowance for a spouse who was in a “committed relationship” with the borrower but who may not have been allowed to marry at the time the HECM closed, but who was or will remain married at some point prior to the death of the borrower married after the borrower moved to a healthcare facility.
Response to original ML
Reverse Mortgage Servicing Professionals for the most part welcome the new changes from HUD when RMD reaches shortly after the corresponding ML is released.
“I believe the service industry is grateful that HUD essentially created a set of rules for all non-borrowing spouses to stay in their homes,” said Leslie Flynne, SVP of Loan Servicing at Reverse Mortgage Solutions (RMS) to RMD inMD Can. “The timeframes it takes NBS to meet the requirements are achievable and hopefully this will end this very annoying problem.”
NRMLA members can view the submitted letter in full on the association’s website website.