HECM Reverse Mortgage Rules Allow Non-Borrower Spouses Of Reverse Mortgage Borrowers To Remain In The Home
FHA announced changes to its HECM Reverse Mortgage rules two years ago. Yet, many people are unaware that these changes in the HECM program allow non-borrowing spouses to stay in their homes after the last surviving borrower dies.
FHA released new guidance to its reverse mortgage rules earlier this year allowing FHA-approved lenders to delay foreclosure proceedings against non-borrowing spouses. Non-borrower spouses will be allowed to stay in the home in the event of the death of the borrower.
FHA is now expanding on those HECM Reverse Mortgage rules for its Home Equity Conversion Mortgage program. The new policy allows lenders to submit claims on HECMs with non-borrowing spouses on loans assigned before August 4, 2014.
Lenders would submit claims by:
- Electing to assign the HECM to HUD upon the death of the borrower where the HECM would not otherwise be assignable to FHA. This is also known as the Mortgagee Optional Election Assignment.
- Allowing claim payment following the sale of the property by heirs or estate.
- Foreclosing in accordance with the terms of the mortgage. Then file an insurance claim under the FHA insurance contract as endorsed
FHA will now allow lenders to assign a HECM to HUD despite the death of the borrower.
The Non-Borrowing Spouse May Remain In Their Home If They Meet Certain Criteria
HUD will allow the non-borrowing spouse to remain in their home if they meet the terms of the original mortgage. They must also meet the following conditions:
- The lender or servicer agrees
- The loan has a pre-August 4, 2014 FHA case number
- The non-borrowing spouse is current in making timely tax and insurance payments
- They maintain the property under the terms and conditions of the HECM
- The borrower and non-borrower were legally married when the loan closed.
- The spouse and non-borrowing spouse were in a committed same-sex relationship but were prohibited from legally marrying.
- The borrower and non-borrowing spouse became legally married prior to the death of the borrower
- They currently reside and resided in the property as his/her principal residence at the origination of the HECM and throughout the duration of the HECM borrower’s life
- They have, or are able to obtain, within 90 days following the last surviving borrower’s death, good, marketable title to the property or a legal right to remain in the property for life