FHA moves to protect non-borrower surviving spouses

By Lisa M. Goolik, J.D.

Last week, the FHA announced the issuance of new guidance that allows reverse mortgage lenders to assign eligible Home Equity Conversion Mortgages (HECMs) to the Department of Housing and Urban Development upon the death of the last surviving borrowing spouse. The new policy effectively allows eligible surviving spouses the opportunity to remain in the home despite their non-borrowing status, the FHA stated.

The guidance amends regulations for HECMs with an FHA Case Number assigned prior to Aug. 4, 2014, to provide an alternative option for claim payment for an eligible HECM with an Eligible Surviving Non-Borrowing Spouse. In those cases, lenders will be permitted to pursue claim payments 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
• utilizing the Mortgagee Optional Election Assignment by 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.

Assignments will be accepted beginning June 1, 2015.

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