More Protections Announced for Spouses Who Have Reverse Mortgages
For spouses of borrowers who pass away, the Federal Housing Administration (FHA) has some relief, in the form of a new announcement with new guidelines that can cake it easier for you to keep your home. The changes apply mostly to reverse mortgages.
What is a Reverse Mortgage
A reverse mortgage is a mortgage where equity is taken out of a house and paid back to the borrower. Payments are usually made periodically, such as every month. For those who are elderly, and who have lived in their home for a long time and who thus have amassed a lot of equity in their property, the program can serve as a financial lifeline or just some extra supplementary income.
The money borrowed does not ever have to be paid back, except if there is a default or if the borrower dies. A default can happen if the borrower fails to pay property taxes, insurance, or meet some other requirement of the loan document.
The Problem With Reverse Mortgages
When the borrower dies, the bank will take the property, and will usually sell it, paying itself back in the process. This is why a reverse mortgage is usually not an option for someone who plans to leave their property to loved ones after they pass.
A common problem is where an elderly couple lives together, but only one person is named on the loan documents. When that person passes, the bank takes the property, leaving the other spouse with no options, and thus forcing an often elderly and lower income person into homelessness.
The HUD Assignment Program
Since 2014, HUD has had a policy that allows the surviving spouse to assume the mortgage—essentially, to receive the payments the deceased would have been paid, and also obligating the surviving spouse to the obligations of the loan, such as paying property taxes.
HUD recently announced changes to the program. The changes eliminate the 120-timeline that surviving spouses had to meet to pay all outstanding charges or fees on outstanding reverse mortgages. The rules also require that mortgage servicers act within 180 days in initiating an assignment to the surviving spouse.
Non borrowing spouses often had to show there was good and marketable title to the property, which could be burdensome for elderly people (especially those grieving over the loss of a loved one). This requirement has been eliminated.
The new rules also require that servicers get information from surviving borrowers as to any surviving non borrowing spouses.
The rules generally take away all the time restrictions for an assignment, which is extraordinarily helpful for spouses who may need time to gather information, or get legal help to assist them in getting the information they need to help them keep their property after the death of a loved one.
Hopefully the new policies will reduce foreclosures, but if you find yourself in foreclosure, get help. Contact Jacobs Legal to speak with one of our Miami consumer rights attorneys today.