New policy: Reverse mortgage spouses keep the house

Consumer advocates on Monday praised a new federal policy that adjusts the reverse mortgage program to allow surviving spouses to remain in their homes after the borrower's death.

Under the former policy, thousands of elderly spouses potentially faced eviction in loans originated before Aug. 4, 2014. On Friday, the U.S. Department of Housing and Urban Development (HUD) announced a change that would make it possible for seniors to stay so long as they paid taxes and insurances and maintained the property. The Federal Housing Administration (FHA), which backs almost all reverse mortgages, is overseen by HUD.

"HUD's new policy is welcome news for surviving non-borrower spouses, many of whom would otherwise be facing foreclosure," said a joint statement from a group of six organizations and reverse mortgage abuse advocate Sandy Jolley. "This news will be a huge relief for homeowners who are facing sale dates."

Pressed by a federal lawsuit from the aging-advocacy group AARP and law firm Mehri & Skalet, HUD in January proposed a way for surviving spouses to keep their houses tied to reverse mortgages.

Under the first policy, however, the hurdles were high. The surviving borrower had to be the same age as, or older than, the deceased borrower when the loan was originated, or the spouse had to pay off the loan amount. Consumer advocates said practically nobody could qualify under those terms.

In March, consumer-advocacy groups asked HUD for revisions.

The revised policy carries no condition about the surviving spouse's age at the time of origination, or the requirement to pay the loan off within a tight window or face foreclosure. The loan's lender or servicer still has to agree to assign the loan to HUD, but consumer advocates say that is a lesser problem than the age and payoff requirements. FHA's reverse mortgage program had already been adjusted for loans originated after the Aug. 4, 2014, date.

The new policy went into effect Friday. Consumer advocates urged servicers to assign the loans where spouses risk foreclosure.

"Because of this new policy, seniors will no longer face foreclosure soon after they lose their spouses, adding misery to heartache," said Craig Briskin, a partner with Mehri & Skalet, which represented three plaintiffs in lawsuits against HUD.

"We stand ready to work with HUD and reverse mortgage lenders to ensure that all surviving spouses can stay in their homes, just as federal law requires," Briskin said.

This article was contributed to The Log by Florida Realtors.