The HECM loan changes, that were recently passed by Congress, and approved by President Obama, include a financial assessment of the borrower, mandatory set asides for property taxes and homeowners insurance, restrictions on the amount of fund that can be initially withdrawn and…most importantly, inclusion of all borrower spouses on the loan regardless of age.
This last regulation is poised, not only to make big changes in the way reverse mortgage loans are conducted, but also in the way they are repaid when the loan reaches maturity.
In the past, reverse mortgage loans–that have become due–with a non-borrowing have caused unforeseen consequences, which have forced the Department of Housing and Urban Development, to consider making changes to current regulations. Currently, pending the President’s signature, the HUD is one step closer to fine-tuning non-borrowing spouse regulations on reverse mortgage loan applications.
How these changes will come about has yet to be seen, but, for now, I think it’s a step in the right direction. How many steps it will take to reach the final destination, remains to be seen.
I previously talked about solutions to a reverse mortgage with a non-borrowing spouse but my suggestions were more of a preemptive method of protection for spouses not included on the actual HECM loan or, sometimes, on the house title. HUD’s regulation, however, will include non-borrowing spouse ON the loan, and ON the house title.
How will this all work out?
As of now, I have no idea. It’s something that has never been done before but the circumstances have demanded it. For now, this possible solution is getting the attention it deserves and homeowners thinking about getting a reverse mortgage loan, to supplement their retirement, can rest easily knowing their spouse will be on the loan with them.
I’m sure they will be a counterpart to this regulation in the near future because, as is, this regulation is unsustainable. For example, a borrower who is 72 years of age with a spouse who is 45 years of age will both be on the loan. However, if the borrower dies within 10 years, the spouse will be 55 and still unable to apply for the HECM loan. This setback is probably something the HUD is already considering as they work to adjust the proposed regulations.
At PS Financial Services, we continue to offer Non-Borrowing Spouse Reverse Mortgages, even though very few companies do. If you think a reverse mortgage is right for you, let us know at PS Financial Services by giving us a call at (888) 845-6630 or emailing us at info@PSReverseMortgage.com. We do not pressure those who inquire, we’re just here to help.