Reverse Mortgage

Relief for Reverse Mortgages Proposed

Congresswoman Maxine Waters (D-CA) wants better transparency for those seniors over 62 that have reverse mortgages, specifically HECM – Home Equity Conversion Mortgage. There have been may issues on what happens to non-borrowing spouses once the other spouse, the borrower, dies.


She argues that by factoring in the age of the youngest borrower in determining reverse mortgage payouts created a “perverse incentive on the part of lenders to encourage couples applying for a HECM loan to remove the younger spouse from the home’s title in order to obtain a larger reverse mortgage payout.”

Furthermore, she cites HUD as having adopted an “erroneous interpretation” of the HECM statue as providing no protection to non-borrowing spouses, as a result of the agency’s ongoing clash with AARP.

Waters is requesting that HUD provide data on the scope of the problem and the financial cost of the various options that the federal agency has at its disposal for providing relief.

Specifically, such data would include finding out, for HECMs with case numbers issued before August 4, 2014, how many borrowers have a non-borrowing spouse that is younger. Additionally, Waters also seeks annual data on how many households with HECMs find themselves in a situation in which the borrowing spouse dies before the non-borrowing spouse.

For HECMs with case numbers issued after August 4, 2014, Waters even wants to go so far as knowing how many borrowers HUD expects will re-marry, and therefore have a non-borrowing spouse that is not covered by Mortgagee Letter 2014-07.

Waters, who serves as ranking member of the House Financial Services Committee, writes her letter just weeks after HUD officially rescinded Mortgagee Letter 2015-03—by way of ML 2015-12—effectively revoking guidelines detailing the Mortgage Optional Election (MOE) Assignment of HECMs assigned before August 4, 2014.

Under the previous guidelines, lenders would have been able to assign eligible HECMs to HUD upon the death of the last surviving borrowing spouse, thereby allowing surviving spouses to remain living in the home despite their non-borrowing status.

By Diego Loya

Diego Loya is a Realtor - Broker at Home Living Real Estate Brokerage, a Orange County full services real estate company. Over the past 12 years, Diego has helped homeowners sell and buy their homes. He's loves educating and empowering real estate consumers. You can find him on Google, Facebook and Twitter.

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