New FHA Regulations Created to Protect Non-Borrowing Spouses
Recent changes to the reverse mortgage program have made it a more advantageous retirement planning tool for the future. However, for some borrowers, there was still the lingering question of what would happen to their spouse upon their passing.
Non-borrowing spouses can finally sleep soundly, thanks to the recent changes made by the Federal Housing Administration regarding non-borrowing spouses.
In a recently released mortgagee letter, outlined by Reverse Mortgage Daily, non-borrowing spouses will be able to remain in their homes, after the borrower has passed away, if they were married to the borrower at the time of closing and their status as a married couple was disclosed at the time through a certified letter.
While not an all inclusive solution, it does demonstrate that FHA is making the necessary changes to protect borrowers and non-borrowing spouses. The new regulations will be set forth for new case numbers assigned on or after August 4th.
In the past, non-borrowing spouses have been left off the loan because of their age or a myriad of other reasons. Recently FHA has also begun to consider including non-borrowing spouses on the loan as well.
However, if and when this becomes a reality, the amount of funds a borrower could receive may be lower as it would be based on the age of the youngest borrower. While this not may be the best solution for all, borrowers may feel better about the process if their spouse is included as well.
In addition, non-borrowing spouses will be able to defer the loan’s due and payable status under the terms of the original loans if the borrower passes away as underlined in the Mortgagee Letter 2014-07. This certification must be submitted with additional documentation if and when the original borrower passes away or moves out of the residence permanently.
FHA has also granted a 60-day extension to any non-borrowing spouses facing foreclosure although these new regulations only apply to new non-borrowing spouse cases and not existing loans. Existing loans may be able to refinance to include a non-borrowing spouse before or after the original borrower’s passing, if the amount borrowed has not exceeded the value of the home.
Non-borrowing spouses have always been one of the main reasons behind reverse mortgage counseling. As a borrower must understand their duties, a non-borrowing spouse must also understand what is expected of them.
Thankfully, new regulations will be able to better insulate non-borrowing spouses in the future and bring some relief to current non-borrowing spouses.
If you want more information on the reverse mortgage program give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com. We do not pressure those who inquire. We are simply here to help.