February 2, 2015
The FHA and HUD have issued a press release announcing new options to avoid foreclosure on HECM homes in cases where the “last surviving borrower” dies but a non-borrowing surviving spouse still occupies the home. According to HUDNo.15-010, the FHA has issued a new policy, “under its Home Equity Conversion Mortgage (HECM) Program giving FHA-approved lenders the option to delay calling HECMs with eligible ‘non-borrowing spouses’ due and payable.”
According to the press release, a delay would postpone foreclosure, “normally triggered by the death of the last surviving borrower. FHA’s new guidance will allow reverse mortgage lenders to assign eligible HECMs to HUD upon the death of the last surviving borrowing spouse, thereby allowing eligible surviving spouses the opportunity to remain in the home despite their non-borrowing status.”
Last year, the press release says, the FHA altered its’ HECM policies, “to allow for the deferral of foreclosure, or ‘due and payable status’ for certain Eligible Non-Borrowing Spouses for case numbers assigned on or after August 4, 2014. Today’s action allows lenders to offer similar treatment for eligible HECMs and Eligible Non-Borrowing Spouses with FHA case numbers issued before August 4, 2014.”
Now, with the newest changes in FHA HECM loan policy, “lenders will be allowed to pursue claim payments for HECMs with Eligible Surviving Non-Borrowing Spouses and Case Numbers assigned before August 4, 2014 by:
–Allowing claim payment following sale of the property by heirs or estate;
–Foreclosing in accordance with the terms of the mortgage, and filing an insurance claim under the FHA insurance contract as endorsed; or
–Electing to assign the HECM to HUD upon the death of the last surviving borrower, where the HECM would not otherwise be assignable to FHA. (The MOE Assignment)
Lenders who choose the Mortgagee Optional Election Assignment will be permitted, “to modify their FHA mortgage insurance contracts to permit assignment of an eligible HECM to HUD despite the HECM being eligible to be called due and payable as a result of the death of the last surviving borrower.”
We’ll post more details on this HECM loan program change as they become available.
Do you have questions about FHA home loans? Ask us in the comments section. All questions and comments are held for review.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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