FHA Responds to Comments on Non-Borrowing Spouse Guidance

The Federal Housing Administration (FHA) has responded to public comments on its alternative path to claim payment, the Mortgagee Optional Election Assignment, which could allow lenders the option to delay foreclosure of reverse mortgage non-borrowing spouses. 

The new guidance, published in January in Mortgagee Letter 2015-03, has become the topic of conversation among consumer advocate groups and in class action lawsuits, which argue that the policy’s requirements are difficult for many non-borrowing spouses to meet, and it fails to provide adequate relief to these spouses. 

Following the Mortgagee Letter, the FHA solicited public comments and received seven in total during the comment period between February 6 and March 9. 


Comments were submitted by a home equity conversion mortgage (HECM) servicer, a national reverse mortgage association, legal aid and advocacy organizations, as well as other interested parties. 

While some commenters applauded the FHA’s efforts to address challenges faced by non-borrowing spouses, others sought clarification on policy and systems issues, and asked the agency to consider alternative options.

In a Federal Register notice issued on April 29, the FHA responded to the public comments and provided clarifications to facilitate implementation.

Under FHA’s new policy, lenders will have the option to pursue claim payments for qualifying HECMs with eligible surviving non-borrowing spouses and case numbers assigned before August 4, 2014.

They may do so by allowing claim payment following the sale of the property by heirs or estate; foreclosing in accordance with the terms of the mortgage, and filing an insurance claim under the FHA insurance contract as endorsed.

They may also elect to assign the HECM to HUD upon the death of the last surviving borrower, where the loan would not otherwise be assignable to FHA, also known as the Mortgage Optional Election Assignment.

To read the Federal Register notice, click here

Written by Emily Study

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  • The changes are procedural in nature. They do not address the basic issue that the law protects homeowners from displacement and the law states that spouses are homeowners.

    That means that the basic issues have not been settled. If you think that the non-borrowing spouse situation is closer to resolution, then hold on for an interesting roller coaster ride.

    Oh, yeah, the New Reverse Mortgage is new in part because the NBS issue is resolved. If you believe that line, then you are drinking the wrong Kool Aid.

  • I have at least five current clients who were wrongfully foreclosed. This NBS issue just continues to become more and more confusing. But it is a big emerging problem. My solution is fairly simple – Follow the words of the statute, follow the procedures of the regulations.

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