Consumer Groups Push Back Against HUD on Non-Borrowing Spouse Changes

Despite its ongoing efforts to address challenges faced by reverse mortgage non-borrowing spouses, the Department of Housing and Urban Development (HUD) is receiving pushback from consumer advocate groups, which denounce the agency’s latest guidance. 

Earlier this week, advocates and attorneys sent a letter to HUD about its new policy, issued by the Federal Housing Administration in January. The policy, under the home equity conversion mortgage (HECM) program, allows lenders the option to delay foreclosure of non-borrowing spouses.

While it’s not a requirement, lenders will now have the option to assign eligible HECMs to HUD upon the death of the last surviving borrowing spouse, thereby allowing eligible surviving spouses the opportunity to remain in the home despite their non-borrowing status, according to Mortgagee Letter 2015-03. 


Consumer groups, however, charge that this revised guidance is “nearly impossible for the majority of surviving spouses to meet,” citing challenges stemming from the Principal Limit Test.

“Under the new policy, a reverse mortgage servicer could assign the loan to HUD. However, even if the servicer chose this option (at their discretion), the surviving spouse would then most likely need to make a large, lump-sum payment to meet the Principal Limit Test, something that most surviving spouses will be unable to do,” the groups write in a recently released statement.

According to HUD’s Mortgagee Letter, a payment may be made to reduce the unpaid principal balance in order to meet the requirements under the Principal Limit Test. When certain requirements are not met within 90 days after the Mortgagee Optional Election (MOE) Assignment or within 180 days after the publication of the Mortgagee Letter — whichever is later — the lender may proceed with foreclosure. 

Those fighting back against HUD’s non-borrowing spouse changes include Kevin Stein of California Reinvestment Coalition, Odette Williamson of the National Consumer Law Center (NCLC), Maeve Elise Brown of Housing and Economic Rights Advocates, Sandy Jolley, a reverse mortgage suitability and abuse consultant, and others. 

In its letter to HUD, NCLC asserts that Mortgagee Letter 2015-03 will not protect surviving spouses from displacement, but will lead to more foreclosures. Instead, the letter proposes that HUD develop “more effective solutions” that will keep non-borrowing spouses in their home and “fulfill the true spirit and intent of the HECM authorizing statute.”

Written by Emily Study

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  • Mortgagee Letter 2015-03 is ridiculous. HUD will be finding itself in court once again over the criteria used to decide who is and who is not a qualified NBS under that ruling. Nothing in the law or current Court of Appeals decision concludes that only spouses married to the borrower throughout the period of the loan are eligible. That requirement as well as the size of the balance due defy the displacement protection provided spouses of borrowers found in 12 USC 1715z-20(j).

    One must also ask if the scope of the Reverse Mortgage Stabilization Act of 2013 can retroactively apply to mortgages closed before August 9, 2013 when it was signed into law.

    • Good comment Cynic, I agree with you 100%. I have to wonder if the right hand knows what the left hand is doing. I look at some of these things, like Mortgagee Letter 2015-03 and I ask myself if common sense has really died??

      John A. Smaldone

      • John,

        It is things like this that make ya wonder if common sense prevails any longer.

  • I can’t help but wonder what credentials it takes to become a “Reverse Mortgage Suitability and Abuse Consultant like the Ms Sandy Jolley.

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