Certain eligible non-borrowing spouses may avoid foreclosure thanks to the new guidelines released by the FHA on Friday, June 12. According to the new guidelines, as released in Mortgagee Letter 2015-15, when a borrower passes away, a lender may choose to foreclose the home or use a Mortgagee Optional Election Assignment (MOE). The MOE further defers the repayment of the reverse mortgage for the non-borrowing spouse. In other words, non-borrowing spouses may have the opportunity to stay in their homes after their loved one’s passing. This does come with some stipulations. For one, the FHA case number must have been assigned before August 4, 2014 and the HECM and the non-borrowing spouse must meet certain eligibility requirements, including having stayed current on their tax and insurance payments. To learn more, read the full mortgagee letter on HUD’s site.
According to Reverse Mortgage Daily, these new guidelines stem from years of litigation involving non-borrowing spouses. This litigation also included the Department of Housing and Urban Development, and the AARP. In recent years, it has been argued that surviving spouses are not protected from foreclosure when the borrower, their spouse, passes away. Attorneys and advocates of the non-borrowing spouse plaintiffs are happy that their cases had a part in creating better protection for this group of people.