The Department of Housing and Urban Development today provided more detail on the treatment of reverse mortgage non-borrowing spouses.
The agency announced in 2014 that it would implement new protections for qualifying non-borrowing spouses, and the new guidance helps lenders define both eligible and ineligible non-borrowing spouses with respect to their ability to defer loan repayment when the borrower has passed away.
Mortgagees must identify at application any current non-borrowing spouses and determine whether they are eligible or ineligible for a deferral period once the HECM borrower passes away or is no longer residing in the property, according to changes announced by HUD in a new mortgagee letter published Friday.
Mortgagee Letter 2014-07 defines a new type of non-borrowing spouse, termed “ineligible non-borrowing spouse,” which is to be used for a non-borrowing spouse (NBS) who does not meet the Qualifying Attributes requirements defined in ML 2014-07 for a deferral period.
“An example of an ‘ineligible non-borrowing spouse’ is someone who is on title but does not reside in the subject property, or have any plans to reside in the subject property,” says the National Reverse Mortgage Lenders Association (NRMLA) in a statement.
The principal limit will be based on the age of the youngest HECM borrower or eligible non-borrowing spouse living in the property when an ineligible NBS is identified.
Mortgagees may start complying with these non-borrowing spouse requirements for case numbers assigned on or after Jan. 12, 2015. Compliance is required by March 9.
The letter also provides new model certification language that mortgagees must use at origination and throughout HECM servicing when there is an eligible non-borrowing spouse. The certification language replaces language in Mortgagee Letter 2014-07.
In addition, the letter also clarifies non-HECM liens for the “Seasoning Requirements for Existing Non-HECM Liens” Section of Mortgagee Letter 2014-21.
Read Mortgagee Letter 2015-02 here.
Written by Cassandra Dowell