The Federal Housing Administration has just announced new protections for eligible non-borrowing spouses, including for cases where a HECM borrower has resided in a healthcare facility for more than 12 consecutive months. Details were provided in Mortgagee Letter (ML) 2021-11.
Specifically, ML 2021-11:
- Expands criteria that will begin a deferral period for HECMs with case numbers assigned on or after August 4, 2014;
- Expands assignment criteria for Mortgagee Optional Election (MOE) Assignments for HECMs with case numbers assigned before August 4, 2014; and
- Eliminates the requirement for an eligible NBS to establish marketable title or other legal rights to remain in the property following the death of the HECM borrower.
In its announcement, FHA says these program changes should improve the efficiency and long-term viability of the HECM program by aligning all HECMs — regardless of case number assignment date — under the same MOE Assignment policies as previous announced in ML 2019-15. These changes also streamline processes and reduce administrative costs for both mortgagees and HUD by eliminating a disparity in servicing policies based, in part, on FHA case number assignment dates.
The program changes also have a positive impact on HECM borrowers since now all HECM NBS can take advantage of the expanded deferral period and MOE Assignment, which provides non-borrowing spouses with increased options to remain in their homes without having to repay the HECM loan or face foreclosure.
Mortgagees have the option to immediately follow the new requirements, but compliance is mandatory no later than 120 days from today’s publication date (May 6, 2021).
