HUD clears up mortgage confusion

by Donald Horne16 Jun 2015

Peter Bell, President of the National Reverse Mortgage Lenders Association, praised the new policy guidance from HUD regarding the Home Equity Conversion Mortgage for its clarity on what had been a confusing issue.

“As the national voice of the reverse mortgage industry, NRMLA appreciates today’s guidance from HUD that resolves longstanding concerns about the responsible treatment of non-borrowing spouses,” said Bell. “This issue has perplexed homeowners, lenders, and housing counselors for years and it is a relief to have clarity.”

The letter from HUD states: that: “Mortgagees must notify HUD of their election to evaluate at HECM with an FHA Case Number assigned prior to August 4, 2014, and initiate assignments subject to the timeframes specified in this Mortgagee Letter.”

It amends regulations for HECMs with an FHA Case Number assigned prior to August 4, to provide an alternative option for claim payment for an eligible HECM with an Eligible Surviving Non-Borrowing Spouse, adding that nothing in the letter or any other document “interferes with the rights retained by mortgagees to exercise their rights under the mortgages and contract of mortgage insurance as originally entered into.”

HUD made headlines recently after it announced in April that it would be making changes to its program for selling delinquent mortgages, adding protections to prevent foreclosures.

Since 2010, HUD has sold delinquent Federal Housing Administration-backed loans to investors as part of a program meant to stem the FHA’s losses while giving investors a chance to profit by attempting to get homeowners to resume payments. But those sales have gotten heavy criticism from non-profits, who said there weren’t sufficient incentives to keep investors from foreclosing on the homes.

Those changes to the program included requiring mortgage servicers to delay foreclosure for a year and to evaluate borrowers to see if they could be eligible for loan modifications.

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