FHA Changes Mortgagee Optional Election Policy

The Federal Housing Administration has issued new rules that will have a great impact on the reverse mortgage industry.  The new rules will impact the spouses of individuals who had reverse mortgages.  The regulations will do away with a mechanism called the Mortgagee Optional Election (MOE) that made it easier for the spouse of a person with a reverse mortgage to continue to live in the house after the borrower’s death.  Under the old rule the lender would assign the reverse mortgage to HUD.  The new rule will make the reverse mortgage due and payable once the spouse dies.  Some lawmakers are concerned that the new regulations will lead to more foreclosures. 

See Tom Kelly, FHA reverses course on ‘trailing spouse’ issue, The Spokesman-Review, June 14, 2015.