After the release of two Mortgagee Letters by the Federal Housing Administration (FHA) in late September outlining new provisions for the Home Equity Conversion Mortgage (HECM) program, reverse mortgage servicers are responding positively to the expansion of protections for non-borrowing spouses (NBS).
Mortgagee Letter 2019-15 updates the Mortgagee Optional Election (MOE) Assignment for HECMs with case numbers assigned prior to August 4, 2014. Under the MOE options previously available to non-borrowing spouses, some eligible non-borrowing were able to defer loan repayment under certain terms and time frames.
Under the Federal Housing Administration’s Reverse Mortgage Stabilization Act (RMSA) authority, the new letter stands to expand the protections for non-borrowing spouses, which servicers say should streamline the process both for servicers and for the non-borrowing spouses themselves.
“From a servicer’s perspective, we see this mortgagee letter as being a very positive change from HUD that is important for the non-borrowing spouses associated with older HECM loans,” Ryan LaRose, president and COO of national subservicer Celink tells RMD in an email.
Specifically, the new rule provides updates to the MOE assignment election and assessment deadlines and notification requirements. It also eliminates the 120-day timeframe for bringing current all property charges on a HECM that is subject to a pre-existing loss mitigation repayment plan, along with establishing a 180-day reasonable diligence timeframe to initiate an MOE Assignment.
Some of the reasoning for viewing this as a positive update lies in the way that the changes will have the potential to streamline and simplify issues related to MOE assignments, assessment deadlines and notification requirements for both the affected non-borrowing spouses themselves, in addition to the servicers.
“The elimination of some of the more challenging HUD ‘qualifiers’ that previously existed will make the process more streamlined for the non-borrowing spouses,” LaRose says. “In addition, the simplification of the HUD timelines will make the Mortgagee Optional Election process more efficient for servicers. Overall, this is a clear win-win for both servicers and non-borrowing spouses.”
Longbridge Financial, which also operates as a reverse mortgage servicer, sees these changes as a generally positive development for surviving spouses.
“Longbridge is very pleased with FHA’s decision to make changes to the Mortgagee Optional Election requirements to give servicers more flexibility to help Surviving Non-Borrowing Spouses remain in their homes,” says Christopher Mayer, CEO of Longbridge Financial in an email to RMD.
Though Longbridge only entered the servicing space within the last few years, recent acquisition activity has given a new kind of relevance to these changes, Mayer says.
“Although we started servicing loans in 2016, we recently acquired a portfolio of seasoned loans with borrowers who will surely benefit from this update,” Mayer says. “We welcome the changes in the newly released ML and are extremely supportive of FHA’s efforts to improve the HECM program for existing borrowers and to further protect taxpayers.”
In addition to giving updates to the MOE assignment election and assessment deadlines, the letter also details the elimination of the requirement for an eligible surviving non-borrowing spouse to obtain good and marketable title to the HECM property or demonstrate the legal right to reside in the property for life, and modification of related certifications and assignment criteria, along with adding a new requirement for mortgagees to request information from borrowers to attempt to identify Non-Borrowing Spouses.
Read Mortgagee Letter 2019-15 at HUD.