Reverse Mortgage Age Requirement

The HUD inverts the rate (again) for non-borrowing married partners.

Department of Housing and Urban Development (HUD) is continuing to address how mortgage holders and home equity conversion mortgage (HECM) providers, generally known as reverse mortgage providers, should act if a non-participating spouse survive a recently departed debtor.

HUD, in a 24 August 2015 written request to the National Reverse Mortgage Lenders Association, denied applications from industries to further specify the "statutory right" of a non-borrowing partner to retain a lien after the mortality of the borrowers, or to provide non-borrowing spouses with an extended period to allow them to retain in the home where, for example, the borrower's estate procedure is challenged or otherwise delay.

From the outset of the HECM programme, HUD had construed its rules as meaning that HECMs should mature and be excluded after the last remaining debtor has died, regardless of whether that debtor survive from a non-lending marriage partner. During 2013 and 2014, the U.S. District Court for the District of Columbia ruled that this interpretative provision was contrary to the statutes approving the HECM Programme and ordered that HUD should establish a scheme to allow non-lending married partners to retain a lien on the borrower's deaths.

HUD issued Mortgagee Letter 2015-03 on 29 January 2015, which offered HECM mortgage borrowers and service providers an option to the foreclosure of non-borrowing marital partners following the borrowers demise. Mortgagee Optional Election Assignment (MOE Assignment) was formed in ML 2015-03 by which HECM mortgage creditors and service providers could transfer the credit to HUD, provided that the non-financial partner fulfilled certain requirements, which included continuing use of the encumbered land, no other delay according to HECM documentation, and the possibility of "good, merchantable ownership of the land or a statutory right (e.g., an executory tenancy agreement or judicial order) (e.g., a leasehold agreement or judicial order) to the land or property," and that the non-financial partner could meet certain requirements, which included continuing use of the encumbered land, no other delay according to HECM documentation, and the possibility of "good, merchantable ownership of the land or a statutory right (e.g., an executable tenancy agreement or judicial order).

In addition, ML 2015-03 requested the non-borrowing married partners to make a one-off Principal Limit payout, partly based on the age gap between the non-borrowing married partner and the debtor. Principal limit payments could potentially be as high as ten thousand US dollar, preventing a non-lending partner from taking full benefit of the CEE assignment and staying in lien.

Restructured programme no longer demands that a non-borrowing partner pays the main limit in order to be entitled to stay in the pledged object. HUD, however, still demands that the non-lending partners prove that within 90 working days of the borrower's demise they can acquire "good, saleable ownership of the real estate or a statutory right (e.g. enforced tenancy agreement or judicial order) to stay in the real estate for life".

HUD, in a 24 August 2015 written to the National Reverse Mortgage Lenders Associations, denied the branch association's proposal to further specify the "statutory right" of a non-lending partner to stay in the pledged object or to extend this period to non-lending spouses if, for example, the borrower's estate procedure is challenged or otherwise exceeds 90 calendar days. However, HUD did not accept the application, which was submitted to the National Reverse Mortgage Lenders Associations on 24 August 2015.

HUD's policy is to require HECM mortgage borrowers and service providers to request an assessment of whether an unfunded marriage partner can stay in the pledged home due to the nuance of each state's land laws, which can lead to an inconsistency of results depending on who is servicing the credit and where the home is situated.

In addition, HUD's policy will avoid a non-user spouse staying in the pledged possession after his or her spouse's decease for what appear to be such commonplace events as judicial delay, which may lead to a hard result for the youngest spouse or the youngest survivor. While HUD tries to make it harder for non-borrowing spouses to stay in the lien by giving up the obligation to pay the main limit, it consolidates other obstacles to the CEE assignment programme with potentially unfamiliar effects that can help stop non-borrowing spouses from staying in their houses.