Not too long ago, UrbanTurf wrote about the highs and lows of reverse mortgages, a loan product often marketed to seniors who have usually paid off their home, but need cash. In limited situations, the loans can be useful, though we noted they are likely not the best choice for most borrowers.
Reverse mortgages allow a borrower to draw out funds with their home as equity. If they draw out enough funds, they may end up owing the bank money — and though some loans allow borrowers to stay in their homes until their death no matter what they owe, the bank still gets the home after the borrower dies. If that borrower had a spouse, the foreclosure proceedings from the bank could lead to the spouse’s eviction from their home.
Now new rules from the Federal Housing Authority would make it easier for non-borrowing spouses to stay in a home after their husband or wife’s death. The new rules apply to a type of federally-insured reverse mortgage called an HECM, or a home equity conversion mortgage. HECMs are by far the most common type of reverse mortgage.
The protections for non-borrowing spouses are effective for reverse mortgages assigned an FHA case number before August 4, 2014. Both lenders and surviving spouses have to meet other conditions, too — see here for the full list.
Peter Bell, the president of the National Reverse Mortgage Lenders Association, told HousingWire that lenders, too, are receptive to the changes.
“… NRMLA appreciates [the] guidance from HUD that resolves longstanding concerns about the responsible treatment of non-borrowing spouses,” Bell said. “This issue has perplexed homeowners, lenders, and housing counselors for years and it is a relief to have clarity.”
This article originally published at http://dc.urbanturf.com/articles/blog/new_rules_on_reverse_mortgages_protect_spouses_from_eviction/10000
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