FHA Reverse Mortgage Changes
On April 25, 2014, the U.S. Department of Housing and Urban Development (HUD) issued new guidance to ease requirements for non-borrowing spouses on FHA Home Equity Conversion Mortgages (HECM) issued on or after August 4, 2014. The policy changes are in response to complaints from families that are being forced into foreclosure after inheriting a home following the death of a loved one. Non-borrowing spouses, who are named in the HECM documents, will now be allowed to defer payment on the home and continue to occupy the home as the principal residence as long as they meet certain criteria such as paying taxes and insurance on the property.
FHA has stated that it does not have the authority to alter existing loans due to legally binding contracts. On April 30, 2014, Senators Chuck Schumer and Barbara Boxer sent a letter to HUD Secretary Sean Donovan urging FHA to do more to help families with existing HECMs who have received inaccurate and confusing information about their options following a reverse mortgage borrower’s death and are facing foreclosure.
FHA also issued a notice in the Federal Register on May 2, 2014 and seeks comments on the changes outlined in Mortgagee Letter 2014-07. Comments are due on June 2, 2014.