A Department of Housing and Urban Development policy released Friday will allow servicers to assign more reverse mortgages with nonborrowing spouses to HUD upon the borrower's death.
The move gives servicers more access to one alternative to foreclosing on a widowed spouse not listed on the borrower's Home Equity Conversion Mortgage when the borrower dies and the loan becomes due and payable.
"It eliminates some of the requirements that they had proposed earlier. That makes it applicable to a much broader pool of nonborrowing spouses," said Peter Bell, president of the National Reverse Mortgage Lenders Association.
A previous policy addressing this issue was
The rescinded policy had only applied to loans originated before Aug. 4, 2014. Friday's new policy replaces those rules and omits the unpaid principal balance provision.
"Lenders will be permitted [to] assign an eligible HECM to HUD despite the death of the last surviving borrower and regardless of the loan's unpaid principal balance," said HUD, in a press release.
HUD declined to comment on an inquiry into how many more HECMs will now qualify for assignment to its Federal Housing Administration division under this new policy.
Nonborrowing spouse policy reform has resulted from a long-running legal battle over the rights of these consumers between consumer advocates and HUD.
An attorney for plaintiffs said he was still reviewing the new policy Friday, but was cautiously optimistic about it.
"We're still reviewing, but this appears to be a very positive development," said Craig Briskin, an attorney at the Washington law firm Mehri & Skalet PLLC, which is counseling plaintiffs.
Bell was also still reviewing the details of the policy to determine what effect it would have on easing operational burdens on the reverse mortgage industry.
