April 30, 2014
A reader asks, “I have reviewed the new changes regarding protecting the surviving spouse on a reverse mortgage. My husband and I took out a reverse mortgage in 2012 and was told that when I turn 62 in 2015, that I could be added to the loan and be safe.”
“Since then I have found out that is not true. We would have to refinance, however, there may be a large amount of money needed to do this. Now we are worried that I may not get on this loan and I could be in danger if my husband dies before me. Will this new ruling protect me?”
This reader question refers to our previous blog post about changes to the FHA HECM program which now offer non-borrowing spouses protection from losing the home upon the death of the borrower.
According to FHA.gov, “Non- Borrowing Spouses were able to refinance HECMs upon the death of their mortgagor spouses in order to retain the homes. However, FHA recognizes that, for some Non-Borrowing Spouses this option has become more difficult. This has, in some cases, left few viable options for a Non-Borrowing Spouse if they wanted to remain in the home they had previously shared with their spouse.”
The new HECM loan rules have been changed as follows, from a recent FHA Mortgagee Letter, ML 2014-07. That mortgagee letter says in part:
“For any HECM with a case number issued after the effective date of this Mortgagee Letter, in order to be eligible for FHA insurance, the HECM must contain a provision deferring the due and payable status that occurs because of the death of the last surviving mortgagor, if a mortgagor was married at the time of closing and the Non-Borrowing Spouse was identified at the time of closing.”
“Specifically, the HECM documents must contain a provision deferring due and payable status until the death of the last surviving Non- Borrowing Spouse or until another listed event occurs.”
The mortgagee letter is lengthy and is quite new–it requires further study. At first glance there is no indication whether the protections offered by this change in FHA HECM loan rules would apply retroactively or not. The best course of action at present is to contact the FHA directly to ask for further clarification.
It may be that the FHA is considering this issue as this blog post is being written. Whether or not further guidance is pending is unknown at the time of this writing–check with the FHA/HUD to learn what the latest information or updates might be on this issue.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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