A follow-up to my post of March 9, in which I discussed a law suit brought by AARP against the Department of Housing and Urban Development concerning the agency's policies about reverse mortgages. As I noted, HUD had instituted a policy in 2008 which forced surviving spouses who inherited homes but were not co-borrowers on a reverse mortgage into selling their homes if the house was “upside down” and worth less than the amount borrowed, instead of allowing them to buy out the lender for the amount of the balance, despite the fact that third parties could do so.

As of April 4, HUD published a notice reversing this policy. As a result, the borrower and the borrower's estate is protected no matter who pays off the lender even if that homebuyer is a surviving spouse, family member or relative. This is great news for borrowers and their families, and levels the playing field.