HUD budget wording may threaten reverse mortgage protections

Senators seek clarification on 2-year-old rule that gave surviving spouses certain rights.

A small wording change in a proposed HUD budget request could change reverse mortgages and increase the risk of foreclosure for some elderly homeowners.

The wording change, according to a story in The New York Times, affects 2-year-old provisions in federal housing rules that give certain rights and protections to the spouse of a borrower who takes out a reverse mortgage and later dies.

The wording change could increase the chances that a surviving spouse who did not sign the mortgage documents could lose their home in a foreclosure.

Senators Marco Rubio (R.-Fla.) and Catherine Cortez Masto (D.-Nev.) sent a joint letter to Ben Carson, the secretary of the Department of Housing and Urban Development, and Mick Mulvaney, director of the Office of Management and the Budget, two months ago, seeking clarity on the proposed wording in the budget request and asking whether the agency was seeking to reverse the earlier policy change.

The senators have yet to receive a response from HUD, which is causing some concern.

Before the change in policy two years ago, a surviving spouse who had not signed the mortgage document often had to pay what was left on the loan in full or risk being evicted in a foreclosure.

In their May 31 letter, the senators referred to the old policy as a “loophole” that had “compounded the stress faced by widows and widowers at a time when they were already grieving the loss of their spouse.”

The proposed change in the National Housing Act that the senators and advocates for the elderly find potentially troubling says, in regard to reverse mortgages, that a mortgagor “shall not include the successors and assigns of the original borrower under a mortgage.”

That wording would seem to suggest that a surviving spouse is not necessarily entitled to stay in the home. At the same time, however, the budget proposal includes a new line that would give the secretary of HUD wide discretion to determine when a loan is payable after the death of the borrower.

“HUD’s proposed changes to reverse mortgages included in the last budget raised concerns that the administration may be seeking to undo hard-fought existing protections,” Ms. Cortez Masto said in an emailed statement to the Times. “I hope the administration can make clear that they’re not looking to push seniors out of their homes after the death of their spouse.”

The Department of Housing and Urban Development declined to comment, the Times said.