Senators Still Waiting on Reverse Mortgage NBS Clarification from HUD

More than two months ago, a bipartisan pair of senators wrote to the Department of Housing and Urban Development over a confusing line about reverse mortgages in President Trump’s proposed 2018 budget. They’re still waiting for an answer.

Sen. Catherine Cortez Masto, a Nevada Democrat, and Sen. Marco Rubio, a Florida Republican, haven’t heard back from HUD Secretary Ben Carson about an interesting linguistic quirk regarding non-borrowing spouse protections for borrowers, according to the New York Times. 

In the budget document, the Trump administration appeared to make a change to the definition of “mortgagor,” amending a passage in the National Housing Act to emphasize that it does not apply to “the successors and assigns of the original borrower under a mortgage.” Additionally, the document removed a line that expanded the definition of “homeowner” to apply to spouses, as RMD reported at the time.

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Concerned about the potential effects that such a subtle change would have on elderly homeowners in their respective home states, Rubio and Cortez Masto wrote the letter on May 31, addressing their message to both Carson and White House budget director Mick Mulvaney.

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

The Times points out that a decision to roll back non-borrowing spouse protections, which were introduced in 2014 and 2015, was particularly curious given that the industry’s top trade group, the National Reverse Mortgage Lenders Association, had not asked for the change.

NRMLA president Peter Bell confirmed the group’s stance in an e-mail to RMD Tuesday.

“NRMLA believes that the current existing NBS rules are adequate,” Bell said. “We have not requested any changes.”

Even if the change was merely an oversight or an error, any updated language could have an immediate and potentially severe impact on the Home Equity Conversion Mortgage program.

“Our sense is it is bad drafting, but when bad drafting goes through, it can lead to bad policy,” National Consumer Law Center staff lawyer Alys Cohen told the Times. “And you can lose control of things once you have new language.”

The Times piece also gives a brief history of the reverse mortgage program, from controversies surrounding advertising to the potential benefits of the loans for “those over age 62 who want to stay in their homes and owe little to nothing on a mortgage.”

“Many predict that with home prices rising again and a growing number of baby boomers reaching retirement age, there will be a revival in this market as the elderly look to supplement their living expenses,” the Times concludes.

Read the full piece at the New York Times.

Written by Alex Spanko

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  • Perhaps HUD will argue its authority under 12 USC 1715z-20(h)(3) to override 12 USC 1715z-20(j). In 23 years, it would seem as if HUD could have gone to Congress to get the law changed so as to just remove the following sentence: “For purposes of this subsection, the term ‘homeowner’ includes the spouse of a homeowner.”

    None of the current non-borrowing spouse rules were ever presented or approved by anyone other than the executive staff at HUD. They are embodied in Mortgagee Letters 2014-07, 2015-02, and 2015-15. These MLs were incorporated into the proposed regs issued in January 2017.

    Now we will see if Congress agrees with HUD that unqualified non-borrowing spouses will be removed from the home at the death of the last surviving borrower. Also we will see if a spouse who marries a borrower after the borrower obtains the HECM is automatically an unqualified non-borrowing spouse. Finally we will see if any other cause of loan termination will end up with ALL non-borrowing spouses being required to leave the home.

    Frankly HUD should have gone to Congress decades ago to get the change made by Congress. Instead HUD had to sued before it would make any action. It is unclear what action AARP might take at this point in time.

  • Much of what The_Cynic has commented on is very true.

    The ambiguity of what took place a couple of months ago needs to have answers come back to us ASAP.

    However, where the Non-Borrowing Spouse so called ruling is concerned, the industry as a whole is under the impression and selling this ruling as it has been spelled out to them!

    In short, “A spouse that is under the age of 62 can remain in the property for the rest of his or her life if the 62 year or old spouse shown as the borrower dies”! This is how we have presented it, this is what we have all accepted as an implemented final ruling?

    Yes, as we know the Non-Borrowing spouse does have to qualify, execute certain documents ETC.

    If this portion goes away, it will hurt the HECM industry tremendously, clarification is needed quickly, hopefully NRMLA can be a major influencing factor in this!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      Rather leaving readers questioning what in my comment is not TRUE (including me), please speak to such untruths so that we know what you are talking about.

      Here is what false. Not all surviving spouses who were not 62 or older at closing will qualify for the deferral. Saying that the under 62 year old spouse who is married to the borrower at closing will qualify for the deferral is not true (that non-borrowing spouse MIGHT qualify). This automatic qualification based on marriage at closing is a farce and a new myth that originators and lenders have created.

      Those you think qualification is merely a matter of administrative sign offs does not understand any of the mortgagee letters, period. That is yet another myth. The non-borrowing spouse must also meet the residency requirements since the loan closed as well as having a qualifying interest in the property after the death of the borrowing spouse. Those are not just administrative sign offs.

      If NRMLA had a chance of being a major influencing force in this matter, do you really think we would be in this mess???

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