Reverse Mortgage Stakeholders Call for Industry to Clarify NBS Protections

Home Equity Conversion Mortgage rules have made major strides in recent years when it comes to non-borrowing spouses (NBS) of reverse mortgage borrowers. With principal limit factors considering the ages of both the named borrower as well as any NBS, and some non-borrowing spouses having access to a deferral period in the event that a borrower does pass away, the program has come a long way from the days when a NBS had few to no options in the event of a borrower’s death.

Yet there is some disagreement among lenders when it comes to one common occurrence regarding NBS situations: when a borrower moves from the home to a nursing home on a permanent basis.

Several key stakeholders have researched the issue and are calling upon the industry to unify their advice to borrowers, according to a call letter released this week by Shelley Giordano, chair of The Funding Longevity Task Force at The American College and Jamie Hopkins, a professor at The American College who has published extensive research on reverse mortgages.


Citing a survey published by Kiplinger, the stakeholders point to a discrepancy among lenders when it comes to explaining NBS protections.

“The [Federal Housing Administration]-insured reverse mortgage, the Home Equity Conversion Mortgage (HECM), is due and payable when the borrower leaves the home permanently,” they write. “Some believe that the HECM loan agreement provides a deferral period for an eligible NBS in the event that, should the borrower remain in a nursing home, having exited the home permanently, the NBS deferral period would apply. This impression is incorrect.”

Further clarifying, Giordano and Hopkins point to language in the Final HECM Rule that indicates the HECM is not assumable, meaning that should the borrower leave the home for any reason other than death, the loan becomes due and payable. Yet, they say, some originators and lenders are presenting a contrary option that is damaging to consumers.

“The Task Force is asking reverse mortgage underwriting authorities to immediately clarify to their originators that any information given to the contrary is inaccurate and potentially harmful to the consumer,” they write.

Written by Elizabeth Ecker

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  • I agree with Shelly on the acknowledgments, well deserving!

    However, I also strongly agree with Carmine DeSoto, “It really does not matter how unified the industry is. What counts is the opinion of one party —- HUD.”

    You have to admit, that is right on!

    John A. Smaldone

    • I believe HUD has been pretty clear on this: Borrowing spouse’s DEATH is a requirement for NBS to have protection from the due & payable provision of the loan.

      What is being suggested is that all in the industry get on the same page to avoid potential misunderstanding and harm to the consumer.

      • Overhanging the whole situation is whether the Bennett vs. Donovan case (or a similar case) will be heard by the Supreme Court at any time in the future. Until then, it seems we must follow the eligible NBS rules as directed by HUD in the relevant 2015 Mortgagee Letters.

  • Thanks RMD, Shelley, the taskforce, and The American College for bringing relevant content to the forefront. Like many regulations, it seems unfair on the surface. But NBS regulatory language (24 CFR §206.55) was written specifically to handle one problematic maturity event – death of the borrower. A change to the occupancy requirements would be a radical departure from current HECM requirements.

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