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Senators Raise Questions About Reverse Mortgages and Trump Budget

A pair of senators from opposite sides of the aisle on Wednesday sent a joint letter to the Department of Housing and Urban Development, seeking clarification about a proposed change to the rules protecting non-borrowing spouses of reverse mortgage borrowers.

Sen. Marco Rubio, a Florida Republican, and Sen. Catherine Cortez Masto, a Nevada Democrat, asked for “additional information” about an appendix in the Trump administration’s proposed fiscal year 2018 budget, which appeared to modify existing Home Equity Conversion Mortgage program rules regarding non-borrowing spouses.

The White House document called for a change in the language of the National Housing Act to clarify that the term “mortgagor” does not apply to “the successors and assigns of the original borrower under a mortgage.” In addition, the administration appears to request the removal of a phrase that expands the definition of “homeowner” to include spouses of homeowners.

The phrase appears in a passage that prevents the Federal Housing Administration from insuring any HECM loan that does not defer repayment until the homeowner’s death; by currently including husbands and wives of borrowers under the definition of “homeowners,” the program ensures that spouses cannot be removed from their homes after the borrower’s death.

The letter, addressed to HUD secretary Ben Carson and budget director Mick Mulvaney, expressed concern that the change might erode protections for spouses of HECM borrowers, who for years were subject to possible foreclosure proceedings if they were not explicitly named on the reverse mortgage — for instance, if the spouse died or was forced to move into a long-term care facility.

“Given the gravity of potential changes to this law, we therefore request a written response outlining the rationale underlying this proposed change,” Rubio and Cortez Masto wrote. “We also urge that you continue to ensure that widows do not face eviction in these circumstances.”

Spokespeople for HUD and the National Reverse Mortgage Lenders Association, which had previously indicated that it was still reviewing the proposed HUD budget, did not respond to requests for clarification on the issue at press time.

A staffer in Cortez Masto’s office confirmed to RMD that the removal of the non-borrowing spouses sentence prompted the senator’s concern for the issue.

“We think it could backtrack on some of the surviving spouse protections put in place over the last few years, and we were just inquiring what the intention was of this provision, and what the budget impact would be,” the staffer said.

Rubio and Cortez Masto’s letter mentioned cases in which non-borrowers in their respective home states were forced to leave their homes following the deaths of spouses. The senators also acknowledged recent changes to the program that allow such residents to remain in their homes, referring to FHA program updates made in 2014 and 2015 — as RMD covered at the time.

President Trump’s proposed budget, which would slash a total of $6.2 billion from HUD’s coffers, remains simply the president’s wish list; the federal budget is the domain of the legislative branch, with the House and Senate expected to provide their own budget guidance in the coming months. The 2018 fiscal year begins this October.

Written by Alex Spanko