Latest HUD Guidelines
The latest HUD guidelines have been released. Under Mortgagee Letter 2014-07 (April 25, 2014) (Non-Borrowing Spouse) released by HUD earlier today, HUD announced that, effective for Case Numbers for HECM loans issued on or after August 4, 2014, if and for so long certain new and important requirements are met, the spouses of HECM mortgagors at the time of the closing of their loans, who are not also mortgagors at that time, nevertheless may remain in those homes after the death of such mortgagors, for a newly defined and potentially long duration “deferral period.”
In making its announcement, HUD effectively yielded to the final judicial interpretation in Bennett v Donovan (U.S. District Court for the District of Columbia), of the National Housing Act Non-Borrower Spouse “Safeguard” provision (Section 255(j)).
The new Mortgagee Letter, when effective, makes significant changes to the HECM program. It creates or confirms important new obligations and opportunities for married senior HECM loan borrowers and their spouses. It imposes new and ongoing responsibilities upon originators, counselors and servicers. And, when effective, it will affect the HUD Mutual Mortgage Insurance Fund, in ways that may be clearer when, before its effective date, HUD publishes new Factor Tables that will be the basis upon which originators, in consideration of the age of the youngest mortgagor or Non-Borrowing Spouse, will need to establish the Principal Limit of such HECM loans.