HUD Makes Headway on Reverse Mortgage FA, Non-Borrowing Spouses

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

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  • The non-borrowing spouse proposal described above does not address the issue of a spouse who became a spouse after the HECM is closed in light of the anti-displacement requirement in HECM law. Fixing this issue piecemeal is hardly what is needed. HUD needs to step up and address all of the issue.

    Let us hope that HUD does as NRMLA suggests and that is to set aside the amount of shortfall of taxes and insurance on a life expectancy basis rather than what HUD defined the Life Expectancy Set Aside (or LESA) to be.

  • This is a welcome development on the non-borrowing spouse issue: “HUD will be modifying the PLF tables to cover ages below 62 for this purpose.” It should also forbid removing a spouse from title for HECM. A quitclaim-deed event should be a red flag in any HECM loan file, requiring extra scrutiny before endorsement, if at all.
    Perhaps, the ML will address other aspects of the issue. The litigation path, evidenced by HUD’s notice of appeal following the US District Court ruling in September, is not the solution path. On this issue, let’s think solution.

  • >>the Mortgagee Letter is expected in mid-February

    I wonder why HUD doesn’t provide a status update, when they miss an important date like this. We’ve all been waiting patiently.

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