Recently revised FHA policies have struck reverse mortgages with a different outlook. The main take-away was the extension of options for surviving spouses to stay in their homes after the loan’s borrow passes away.
Originally, the death of a spouse who was the only borrower on the mortgage made the due and payable status clause arise and could even set off foreclosure policies. In 2014, the FHA allowed lenders to defer foreclosure or the due and favorable status for accepted spouses not on the mortgage in the form of case numbers that were only distributed after August 4th, 2014. The new policies in place have made this option possible for mortgages with case numbers before that date now.
Lenders will have the options of:
– Assigning the mortgage to the Department of Housing and Urban Development (HUD) after the death of the last borrower.
– Accepting claim payment after the sale of the house by either heirs or the estate.
– Foreclosure of the property followed by a filed insurance claim with the FHA.
This new policy is already effective in the FHA.