The National Reverse Mortgage Lenders Association (NRMLA) sent a letter to the United States Department of Housing and Urban Development (HUD), specifically asking them to update the loan documents and the guarantee instrument for the conversion mortgage on Home Equity (HECM) to comply with the Spousal Non-Borrowing (NBS) protections that were recently announced in a Mortgage Letter (ML).
In the comments that the association submitted, several modifications are proposed for the relevant documents articulated around a technical axis. Duty officers further requested the ministry to provide written confirmation that they can start complying with the newly announced changes before the relevant loan documents are updated, in order to effectively avoid endangering the insurance of relevant and relevant loans.
“[T]Maturity events in HECM notes and security instruments, as well as borrower’s language and SNB-related closing certifications, if applicable, should be amended to remove the requirement that a SNB must establish a negotiable title or other legal right to occupy the property, and extend eligibility to the deferral period not only to cover the period after the death of a borrower, but also if the borrower is unoccupied for more than 12 consecutive months while in a health facility, ”part of the letter read.
The relevant ML, 2021-11, features four main new protections for NBS eligible in a reverse mortgage transaction, including expanding the criteria that begin a deferral period for HECM loans with assigned case numbers from of August 4, 2014, including for a scenario in which the primary borrower resides in a health facility for more than 12 consecutive months but the BNS has remained at home.
The ML also expands the award criteria for Mortgagee Elective Election (MOE) awards for HECMs with case numbers assigned before August 4, 2014. The new criteria “will include HECMs eligible to be called due and payable. payable under the property is no longer considered a borrower’s primary residence because of the borrower’s residence in a health facility for more than 12 consecutive months, ”according to the ML.
In addition, the definition of someone who may be referred to as an “eligible non-borrower spouse” has been broadened to include “the spouse of a HECM borrower where the HECM loan received an FHA file number prior to August 4, 2014” as well. like several new additional criteria. These newly eligible NBS can be spouses who were legally married to the borrower either by the death of the borrower or when the borrower relocated to a health facility.
This definition also includes an allowance for a spouse who was in an “engaged relationship” with the borrower but who may not have been legally permitted to marry when the HECM closed, but who was married for some time. before the death of the borrower or remains married after the borrower has moved to a health facility.
Reaction to the original ML
Reverse mortgage management professionals widely welcomed the new HUD changes when they were achieved by RMD shortly after the relevant ML was released.
“I think the service industry is very grateful that HUD has basically created a set of rules that allow all non-borrowing spouses to stay in their homes,” said Leslie Flynne, senior vice president of loans at Reverse Mortgage. Solutions (RMS) to RMD in May. “The timeframe required for NBS to meet the requirements is achievable and we hope this will put an end to this very troublesome problem. “
NRMLA members can view the submitted letter in full on the association’s website.