The National Reverse Mortgage Lenders Association (NRMLA) has sent a letter to the US Department of Housing and Urban Development (HUD) specifically requesting the Department to update the loan documents and mortgage conversion guarantee instrument (HECM) so that they are in place. compliance with non-borrowing spouse protections (NBS) that were recently announced in a Letter of Mortgage (ML).
In the comments that the association submitted, there are several editing proposals for the relevant documents that revolve around a technical focus. Staff also requested that the Department provide written confirmation stating that they can begin to comply with the newly announced changes before the relevant loan documents are updated, in order to effectively avoid putting insurance at risk on affected and relevant loans. .
“[T]Maturity events in HECM notes and security instruments, along with the language on the borrower and NBS-related closing certifications, where applicable, must be changed to remove the requirement that an NBS must establish tradable security or other legal right to occupy the property and to expand the eligibility of the deferral period not only to cover the period after the borrower’s death, but also if the borrower is unoccupied for more than 12 consecutive months while in a health care facility,” says the letter in part.
The relevant ML, 2021-11, introduces four new primary protections for eligible NBS in a reverse mortgage transaction, including the criteria expansion that initiates a deferral period for HECM loans with case numbers assigned on or after August 4, 2014, including for a scenario where the primary borrower resides in a health facility for more than 12 consecutive months, but the NBS has remained at home.
The ML also expands the attribution criteria for Mortgage Optional Election (MOE) Assignments for HECMs with case numbers assigned before August 4, 2014. The new criteria “will include HECMs eligible to be called due and payable us terms of the original mortgage due to the property is no longer considered the main residence of the borrower due to the fact that the borrower has resided in a health institution for more than 12 consecutive months”, says ML.
In addition, the definition of someone who can be called an “eligible non-borrower spouse” has been expanded to include “the spouse of a HECM borrower, where the HECM loan was assigned an FHA case number prior to August 4, 2014,” as well as several new additional criteria. These newly eligible NBS may be spouses who were legally married to the borrower upon the borrower’s death or during the borrower’s relocation to a healthcare facility.
This definition also includes an allowance for a spouse who was in a “serious relationship” with the borrower, but who may not have been legally allowed to marry at the time the HECM was closed, but who was married some time before death of the borrower or remains married after the transfer of the borrower to a healthcare facility.
Reaction to original ML
Reverse Mortgage Service Professionals Largely Welcome the new HUD changes when achieved by the RMD shortly after the publication of the relevant ML.
“I think the services industry greatly appreciates the fact that the HUD has essentially created a set of rules for all non-loan spouses to stay in their homes,” said Leslie Flynne, senior vice president of loan services at Reverse Mortgage Solutions (RMS) for RMD in May. “The timeframes needed for NBS to meet the requirements are achievable – and hopefully this will end this very troubling problem.”
NRMLA members can view the entire letter sent in the local on the internet network.