HUD Responds to Reverse Mortgage Non-Borrowing Spouse Statistics

One day after a pair of non-profit groups released a report sounding an alarm about reverse mortgage-related foreclosures, the Department of Housing and Urban Development has responded — and a spokesman claims that the groups’ interpretation wasn’t necessarily correct.

“Based upon data we gave them, they put two and two together and get something other than four,” HUD public affairs specialist Brian Sullivan told RMD on Tuesday.

Sullivan was responding to a report from the California Reinvestment Coalition and Jacksonville (Fla.) Area Legal Aid, which claimed that nearly a quarter of non-borrowing spouses who sought help staying in their homes following the death of a reverse mortgage borrower don’t receive assistance. The groups based their conclusions on HUD data received through a Freedom of Information Act (FOIA) request. 


But Sullivan claims that the groups simply misinterpreted the data’s meaning. The HUD numbers apply solely to applications for loan assignments under the “mortgagee optional election” (MOE), a program in which HUD pays the insurance claim but qualified non-borrowing spouses are allowed to remain in the home.

HUD and the Federal Housing Administration introduced this option in a 2015 mortgagee letter, with the MOE available for all Home Equity Conversion Mortgages with case numbers assigned prior to August 4, 2014. 

“The data is just to signify the number of the assignments or requests for these assignments, as opposed to the number of borrowers being kicked to the curb,” Sullivan said.

He also pushed back against the groups’ claims that HUD doesn’t offer sufficient guidelines on how servicers and lenders should handle non-borrowing spouse cases, pointing to the two mortgagee letters on the subject.

Sullivan emphasized that HUD must continue to balance the interest of protecting taxpayer money — by managing outlays from the Mutual Mortgage Insurance Fund — and protecting seniors, which informs its policy on non-borrowing spouses. He also noted that there remains the potential for non-borrowing spouses to potentially face eviction under the new rules — for instance, if they were delinquent in their taxes or married the borrower after he or she had already taken out the reverse mortgage.

As a result, it’s up to counselors to make sure they fully explain all the potential scenarios to prospective borrowers.

“That is why counseling is so critical in the origination of these mortgages,” he said. “People have got to understand what a reverse mortgage is.”

Written by Alex Spanko

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  • A HECM borrower wrote the other day saying that the so called non-borrowing spouse rules now in effect under Mortgagee Letter (ML) 2015-15 are causing he and his eligible non-borrowing spouse terrible anxiety. He had heard TV ads stating that new non-borrowing rules were now in effect. He called his originator and heard the same. Then he reached out to his servicer and learned the deferral was determined under ML 2015-15 which required that after his demise, the lender would determine if his wife was indeed eligible to defer the payment of the balance due but then the lender would decide if it would foreclose or assign the loan to HUD.

    After working through all of the information, the borrower realized that his lender could foreclose even if his wife met all eligibility requirements. He reached out to his servicer and explained his situation asking for an early determination as to what the lender will do if his wife meets all of the eligibility rules after his death. The servicer then told him that the lender only makes such determinations once the servicer verifies that the non-borrowing spouse is fully and completely eligible. Thus the couple are left having to make alternative plans in case of foreclosure. They are not happy and full of anxiety. He wrote that he wished he was under ML 2015-2 rather than ML 2015-15. He stated that he feels as if the situation is only hastening his death. I had a lot of difficulty responding.

    So while understanding what HUD is saying, ML 2015-15 is not providing the level of reassurance to borrowers and their non-borrowing spouses that it should.

    When spouses of borrowers who marry borrowers after the current HECM closes are automatically held to be ineligible non-borrowing spouses, how can we say that non-borrowing spouses have new protections without caveat? What “new” protections does even ML 2015-02 provide these non-borrowing spouses against future displacement? The answer is clearly NONE.

  • Typical attack by the non profit liberals against the big bad banks without the facts.
    Unfortunately damage has already been done by the fake news!

    • treverse,

      It is clear that the current non-borrowing spouse rules protect some but certainly not all non-borrowing spouses. It is too bad that so many are excluded from this protection based simply on the date they married the borrower in relation to the date of HECM origination.

      You state: “Typical attack by the non profit liberals against the big bad banks without the facts.” Are you saying that HUD intentionally responded to the FOIA request with inadequate, incomplete, or inaccurate information so that these “liberals” would reach the wrong position. Are you accusing HUD of baiting these “liberals?” Or do these “liberals” misstate facts or simply misinterpret them?

      Even NRMLA is somewhat puzzled by HUD practices in relation to HUD non-borrowing spouse displacement policy as found in the Mortgagee Letters as reflected in Monday’s (3/12/2018) RMD related story. NRMLA leadership heads up a non-profit so are you saying they also create “fake news?”

      Industry marketing and advertising has done little to clarify the situation and only inflate the confusion over the displacement protection for non-borrowing spouses. What marketing and advertising should say on this subject is that “HUD has recently mandated limited displacement protections for some non-borrowing spouses.”

      “Fake news” perhaps or maybe an accurate reflection over the confusion on the compromise HUD reached in order to minimize the financial impact of protecting non-borrowing spouses from displacement. The change of policy springing forth from that compromise is modified (for the worse as to non-borrowing spouses) and formalized in Mortgagee Letters 2014-07, 2015-02, and 2015-15.

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