Reforms Sought for Non-Borrowing Spouses

ePath 100K RM leads

NRMLA Submits Requests to Reform NBS Policies

reverse mortgage newsThere may be a window of opportunity in the wake of President Trump’s call to overhaul regulations for financial institutions and housing agencies. The National Reverse Mortgage Lenders Association (NRMLA) submitted several requests to HUD to update and refine the non-borrowing spouse provisions of the Home Equity Conversion Mortgage, and improve the rules for HECM purchase transactions. An opportune moment indeed as HUD has asked for inputs to identify regulations that impose an undue burden.

The addition of non-borrowing spouse protections was a welcomed change that provided protection for the spouses of HECM borrowers not named on the loan and removed a thorn in the side of the HECM industry that buoyed claims of reverse mortgages unfairly punishing widows and widowers in their most painful and vulnerable hours. While several tweaks have been made in recent years, NRMLA has asked for improvements addressing conflicting language in HECM loan documents and provide protection to non-borrowing spouses.

While getting a reverse mortgage is complex, unwinding the loan can be even more complicated for surviving non-borrowing spouses, heirs and services

M.O.E. An Alternative to HECM Foreclosures

This monumental policy change comes in the wake of several notable lawsuits brought against the Federal Housing Administration (FHA) and reflects the agency’s desire to close the door on further displacement of younger non-borrowing spouses. Let me begin by saying that this policy is somewhat complex and we will only be covering the primary guidelines of this new policy.

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The Non-Borrowing Spouse Surprise?

The Home Equity Conversion Mortgage or HECM program still only allows borrowers 62 or older but now adjusts proceeds based on the age of the younger non-borrowing spouse. In essence it gives the non-borrowing spouse the right to remain in the home indefinitely during a ‘deferral period’ provided requirements are met. That said there are a few key points we must now to fully comprehend the benefit and risks of this policy change…

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BREAKING: New PLFs Released

More money for older HECM borrowers, substantially less when younger non-borrowing spouse present

Today HUD released new PLFs (Principal Limit Factors) which now include a table for younger co-borrowers.  Jerry Wagner, the President & owner of IBIS Software which provides  origination software and information for both HUD and HECM Lenders released a very helpful comparison chart (see downloads below) which helps identify the impact of the new lending ratios.

Here is a summary of the changes:

  • HUD made the changes via Mortgagee Letter 2014-12
  • Younger primary borrowers will see a modest increase in their PLFs until the Expected Rate reaches 5.37% and higher (see inset below).
  • Older borrower will see a substantial increase in proceeds until the Expected Rate nears 7% and higher
  • The new Principal Limit Factors go into effect for FHA case numbers assigned on or after August 4th, 2014
  • Borrowers who have not closed their loans and have FHA case numbers prior to August 4th may opt to use the new PLFs (see ML 2014-14 for requirements)
  • The table for younger non-borrowing spouses (18-61 years old) only applies if at least one borrower meets the minimum HECM age requirement of 62. Proceeds will be based on the age of the youngest spouse.


NEW 2014 PLF Table     PLF Change Analysis (IBIS Software)   Mortgagee Letter 2014-14

NEW PLF Analysis
NEW PLF Analysis