The Department of Housing and Urban Development plans to soon publish a Mortgagee Letter clarifying its non-borrowing spouse policy, followed by another Mortgagee Letter with more information on the previously announced financial assessment, according to the National Reverse Mortgage Lenders Association.
The first letter addressing non-borrowing spouses is expected in the next few weeks, Deputy Assistant Secretary for Single Family Housing Charles Coulter told the NRMLA Executive Committee during a January 16 meeting.
“The first ML will essentially require that in the case of a non-borrower spouse, the age of the younger member of the couple will be utilized to determine the appropriate PLF [principal limit factor],” says NRMLA. “HUD will be modifying the PLF tables to cover ages below 62 for this purpose.”
On the forthcoming borrower financial assessment side, the Mortgagee Letter is expected in mid-February and will call for the assessment to be implemented 90 days after it is issued. HUD announced in December 2013 it would delay the implementation of the financial assessment from the original January 2014 effective date.
Based on comments from NRMLA and other reverse mortgage industry stakeholders, HUD has agreed to modify the Financial Assessment’s requirements, says the industry trade group.
The agency is considering allowing the use of reverse mortgage proceeds to pay off non-secured debt, and then taking those eliminated payments into consideration as a “compensating factor” when underwriting the loan.
“Another change under review is, in calculating set-asides, lenders might have the option of requiring a set-aside to cover the shortfall in meeting the minimum cash flow requirements, rather than requiring a set-aside for the full cost of taxes and insurance,” says NRMLA.
Other issues the Mortgagee Letter is expected to provide guidance for include compensating factors, how to treat benefits a prospective borrower receives, and tax deferral programs.
Written by Alyssa Gerace