FHA Publishes Responses to Comments on Rule Delaying Foreclosure on Non-Borrowing Spouses

The Federal Housing Administration (FHA) responded in the Federal Register on Wednesday to comments on the alternative path to claim payment (the Mortgagee Optional Election Assignment) for certain Home Equity Conversion Mortgages (HECMs), which centers on the delaying of foreclosure on a surviving non-borrowing spouse following a borrowing spouse's death.

The FHA published a notice soliciting comments on the matter on February 6, and the comment period ended on March 9. In the four and a half week comment period, FHA received seven comments on the issue. Click here to see all seven comments and the complete responses from FHA. The comments centered mainly around asking FHA to clarify the eligibility requirements for surviving non-borrowing spouses (or any heir named on the title) to receive HECM relief.

FHA and HUD amended their HECM program in January prevent reverse mortgage lenders from calling the note from a surviving non-borrowing spouse – but the amendment applied only to case numbers assigned on or after August 4, 2014, and for certain eligible case numbers assigned before that date. The requirements to qualify for HECM relief shut many out, however – the servicer has to agree to assign the loan to HUD rather than pursue foreclosure, and the surviving spouse must be either older or the same age as the deceased borrower at the time the loan was originated – or the surviving spouse must pay off the entire loan amount or 95 percent of the home's value.

In March, a group of concerned consumer advocates submitted comments totaling 65 pages to HUD expressing concerns over non-borrowing spouses facing foreclosure and eviction following the death of a borrowing spouse. In February, a CFPB report on consumer complaints regarding reverse mortgages found that the most common complaint was on surviving non-borrowing spouses suddenly facing foreclosure when a borrowing spouse dies – finding that "some consumers report that their loan originator falsely assured them that they would be able to add the other spouse at a later date."