Commercial or Income Property Loans

We offer fixed and adjustable rate programs for the acquisition, construction, renovation, and refinance of commercial and/or income property Loans. These loans are  property specific in nature to each transaction. Loan amounts can range from $300,000 up to $4,000,000 to qualified applicants. These loans are underwriting based on the type of property securing the loan and the Net Operating Income that the property generates.

For more information about Commercial or Income Property Loans contact Dennis Harter at 707-575-3220

Construction Loans

Sequoia Pacific Mortgage Company offers interim construction loans for residential dwellings, apartments, commercial buildings, and spec homes. The term of a construction

loan can be anywhere between 9–12 months with permanent financing available after the construction loan period. Typically the construction period will be a fixed rate

mortgage. The permanent loan can be any one of the loan types referred to to in the RESIDENTIAL LOANS section of our web page. These loans are considered specialty

loans.

For more information about construction financing contact Dennis Harter at 707-575-3220 or email him at Dennis@sequoiapacificmortgage.com

Reverse Mortgage at Sequoia Pacific

Sequoia Pacific Mortgage Company has provided the Reverse Mortgage loan products to Seniors in the Northern California area since 1996.  Reverse Mortgages allow Seniors to convert part of the equity in their home into cash without having to sell, move, give up title, or make a monthly mortgage payment.  Borrowers can choose to receive Reverse Mortgage funds as a lump sum, fixed monthly payments, line of credit, or as a combination of monthly income and line of credit.  The loan is repaid when the last surviving borrower sells the home or permanently moves out.  Reverse Mortgages funded today are loans insured by the Federal Housing Administration (FHA). 

For information about Reverse Mortgages please feel free to contact one of our Reverse Mortgage specialists. Tracy Kline, Francie Forchini or Dennis Harter today 707-575-3220

Residential Loans

 FIXED RATE MORTGAGES:

Sequoia Pacific Mortgage Company offers fixed rate mortgages with a range of periods that you can select to pay off your loan balance.  The periods offered are 40, 30, 20, 15 and 10 years.  The fixed rate mortgage is the traditional method for borrowers since the

principal and interest payments are amortized over the term of the loan so that each monthly payment is equal. The advantage of a fixed rate mortgage is that your monthly payment on the loan will be the same for the life of the loan.  Eligible properties include single family residences, 2 to 4 units, PUD’s and condos, second homes and investor properties.

 ADJUSTABLE RATE MORTGAGES:

Sequoia Pacific Mortgage Company offers adjustable rate mortgages for a 30 year term. With an adjustable rate mortgage (ARM), the interest rate and payment amount can increase or decrease only at pre-determined intervals.  The interest rates for adjustable rate mortgages are tied to indexes plus a margin.  Currently the 1-Year LIBOR index is the commonly used index.  In general, adjustable rate mortgages (ARM’S) tend to be less expensive over the life of the loan than fixed rate loan, especially in the first years, this is because the lender is willing to charge lower initial interest rates for the ARM’s  because the borrower is sharing part of the risk should interest rates rise.  Eligible properties include single family residences, 2 to 4 units, PUD’s and condos, second homes and investor properties.

 INTERMEDIATE FIXED RATE ADJUSTABLE RATE LOANS: 

Sequoia Pacific Mortgage Company offers an adjustable rate mortgage in which there is an initial period that the interest rate and payment is fixed.  After the initial fixed period, the loan has the same features as an adjustable rate loan with annual interest rate and payment adjustments for the remaining life of the loan.  This loan product can offer lower initial fixed interest rates for borrowers that intend to move, sell or payoff their loan within the initial fixed period.  The fixed period offered are 3, 5, 7 and 10 years.  Eligible properties include single family residences, 2 to 4 units, PUD’s and condo, second homes and investor properties.

 FHA & VA Loans » 

Sequoia Pacific Mortgage Company is pleased to provide for you the below resources to assist in you in the process of purchasing your home using government means.

 FEDERAL HOUSING ADMINISTRATION (FHA)

 FHA began in 1936 as part of President Roosevelt’s effort to jump start the economy during the Great Depression.  FHA mortgages has provided low cost housing financing over the years and continues to provide access for first time Home-buyers by requiring a down payments as low as 3.5% of the purchase price.  In addition, the down payment can be provided by a Gift from a family member. FHA mortgages are offered in a variety of loan products such as a Fixed Rate, Intermediate Fixed Adjustable Rate Mortgage.     

 VETERANS ADMINISTRATION LOANS (VA)

The Veterans Administration is neither the lender nor investor in the granting of VA loans.  The Veterans Administration only insures the loans based on the guideline’s of both the VA and Congress.  For a qualifying Veteran, a VA loan can be a great benefit for it allows the Veteran to purchase an owner occupied home with as little as $1 down!

For more information contact one of our finance specialists today 707-575-3220

What Sequoia Pacific has to offer you!!

Residential Loans

FIXED RATE MORTGAGES:

Sequoia Pacific Mortgage Company offers fixed rate mortgages with a range of periods that you can select to pay off your loan balance.  The periods offered are 40, 30, 20, 15 and 10 years.  The fixed rate mortgage is the traditional method for borrowers since the

principal and interest payments are amortized over the term of the loan so that each monthly payment is equal. The advantage of a fixed rate mortgage is that your monthly payment on the loan will be the same for the life of the loan.  Eligible properties include single family residences, 2 to 4 units, PUD’s and condos, second homes and investor properties.

 ADJUSTABLE RATE MORTGAGES:

Sequoia Pacific Mortgage Company offers adjustable rate mortgages for a 30 year term. With an adjustable rate mortgage (ARM), the interest rate and payment amount can increase or decrease only at pre-determined intervals.  The interest rates for adjustable rate mortgages are tied to indexes plus a margin.  Currently the 1-Year LIBOR index is the commonly used index.  In general, adjustable rate mortgages (ARM’S) tend to be less expensive over the life of the loan than fixed rate loan, especially in the first years, this is because the lender is willing to charge lower initial interest rates for the ARM’s  because the borrower is sharing part of the risk should interest rates rise.  Eligible properties include single family residences, 2 to 4 units, PUD’s and condos, second homes and investor properties.

 INTERMEDIATE FIXED RATE ADJUSTABLE RATE LOANS:

 Sequoia Pacific Mortgage Company offers an adjustable rate mortgage in which there is an initial period that the interest rate and payment is fixed.  After the initial fixed period, the loan has the same features as an adjustable rate loan with annual interest rate and payment adjustments for the remaining life of the loan.  This loan product can offer lower initial fixed interest rates for borrowers that intend to move, sell or payoff their loan within the initial fixed period.  The fixed period offered are 3, 5, 7 and 10 years.  Eligible properties include single family residences, 2 to 4 units, PUD’s and condo, second homes and investor properties.

FHA & VA Loans »

 Sequoia Pacific Mortgage Company is pleased to provide for you the below resources to assist in you in the process of purchasing your home using government means.

 FEDERAL HOUSING ADMINISTRATION (FHA)

 FHA began in 1936 as part of President Roosevelt’s effort to jump start the economy during the Great Depression.  FHA mortgages has provided low cost housing financing over the years and continues to provide access for first time Home-buyers by requiring a down payments as low as 3.5% of the purchase price.  In addition, the down payment can be provided by a Gift from a family member. FHA mortgages are offered in a variety of loan products such as a Fixed Rate, Intermediate Fixed Adjustable Rate Mortgage.     

 VETERANS ADMINISTRATION LOANS (VA)

The Veterans Administration is neither the lender nor investor in the granting of VA loans.  The Veterans Administration only insures the loans based on the guideline’s of both the VA and Congress.  For a qualifying Veteran, a VA loan can be a great benefit for it allows the Veteran to purchase an owner occupied home with as little as $1 down!

 REVERSE MORTGAGE >>

Sequoia Pacific Mortgage Company has provided the Reverse Mortgage loan products to Seniors in the Northern California area since 1996.  Reverse Mortgages allow Seniors to convert part of the equity in their home into cash without having to sell, move, give up title, or make a monthly mortgage payment.  Borrowers can choose to receive Reverse Mortgage funds as a lump sum, fixed monthly payments, line of credit, or as a combination of monthly income and line of credit.  The loan is repaid when the last surviving borrower sells the home or permanently moves out.  Reverse Mortgages funded today are loans insured by the Federal Housing Administration (FHA).

 Construction Loans »

Sequoia Pacific Mortgage Company offers interim construction loans for residential dwellings, apartments, commercial buildings, and spec homes. The term of a construction

loan can be anywhere between 9–12 months with permanent financing available after the construction loan period. Typically the construction period will be a fixed rate

mortgage. The permanent loan can be any one of the loan types referred to to in the RESIDENTIAL LOANS section of our web page. These loans are considered specialty

loans.

 Commercial/Income Property Loans »

We offer fixed and adjustable rate programs for the acquisition, construction, renovation, and refinance of commercial and/or income property Loans. These loans are specific

in nature to each transaction. Loan amounts can range from $300,000 up to $4,000,000 to qualified applicants. These loans are underwriting based on the type of property securing the loan and the Net Operating Income that the property generates.

What you Need to Know about Reverse Mortgages for Purchases

 

DOWNPAYMENT AND ALLOWABLE COSTS

Who can pay for what?

 

• Senior borrowers must make a down payment sufficient to satisfy the difference between the amount of money they are eligible for with the Reverse Mortgage  and the sales price for the purchased property, plus any HECM loan related fees that are not financed or otherwise offset by allowable funding sources.

 

•  Seniors obtaining a HECM for purchase may not obtain a bridge loan (or so-called gap financing) or employ other interim financing techniques to meet down payment requirements and/or pay for closing costs.
• This restriction includes subordinate liens, personal loans, cash withdrawals from credit cards, seller financing and any other lending commitments that cannot be satisfied at closing. The source of all funds must be verified prior to closing.

 

•  While it is not unusual to see a seller credit towards non-reoccurring closing   costs in a forward mortgage purchase transaction, a HECM for Purchase transaction do not allow for any non-reoccurring closing costs!

 

•  Any contract or addendum received containing any type of seller concession or seller credit must be renegotiated and the concession or credit eliminated. All changes made to the purchase contract must be initialed by all parties of the contract and any changes or addendums must be reviewed and approved by an Underwriter prior to closing.

 It is our goal to make the process of assisting your clients with a Reverse Mortgage as trouble free as possible. If you have any questions or need more clarification please do not hesitate contacting Tracy Kline one of our Reverse Mortgage Speacialist for more details! Tracy@sequoiapacificmortgage.com or Call 707-575-3220 Ext. 203

A New Kind of Loan: In Reverse

 

A “reverse” mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

-all at once, in a single lump sum of cash

-as a regular monthly cash advance

-as a “creditline” account that lets you decide when and how much of your available cash is paid to you

-as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

Other Home Loans

To qualify for most loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don’t have to make monthly repayments. So you don’t need a minimum amount of income to qualify for a reverse mortgage. You could have no income and still be able to get a reverse mortgage.

With most home loans, you could lose your home if you don’t make your monthly payments. But with a reverse mortgage, there aren’t any monthly repayments to make. So you can’t lose your home by not making them. Most reverse mortgages require no repayment for as long as you — or any co-owner(s) — live in the home. So they differ from other home loans in these important ways:

-you don’t need an income to qualify for a reverse mortgage; and

-you don’t have to make monthly repayments on a reverse mortgage.

“Forward” Mortgages

You can see how a reverse mortgage works by comparing it to a “forward” mortgage — the kind you use to buy a home. Both types of mortgages create debt against your home. And both affect how much equity or ownership value you have in your home. But they do so in opposite ways.

“Debt” is the amount of money you owe a lender. It includes cash advances made to you or for your benefit, plus interest. “Home equity” means the value of your home (what it would sell for) minus any debt against it.

For example, if your home is worth $150,000 and you still owe $30,000 on your mortgage, your home equity is $120,000.

Falling Debt, Rising Equity

When you purchased your home, you probably made a small down payment and borrowed the rest of the money you needed to buy it. Then you paid back your traditional “forward” mortgage loan every month over many years. During that time:

your debt decreased; and your home equity increased.

As you made each repayment, the amount you owed (your debt or “loan balance”) grew smaller. But your ownership value (your “equity”) grew larger. If you eventually made a final mortgage payment, you then owed nothing, and your home equity equaled the value of your home. In short, your forward mortgage was a “falling debt, rising equity” type of deal.

Rising Debt, Falling Equity

Reverse mortgages have a different purpose than forward mortgages do. With a forward mortgage, you use your income to repay debt, and this builds up equity in your home. But with a reverse mortgage, you are taking the equity out in cash. So with a reverse mortgage:

your debt increases; and your home equity decreases.

It’s just the opposite, or reverse, of a forward mortgage. With a reverse mortgage, the lender sends you cash, and you make no repayments. So the amount you owe (your debt) gets larger as you get more and more cash and more interest is added to your loan balance. As your debt grows, your equity shrinks, unless your home’s value is growing at a high rate.

When a reverse mortgage becomes due and payable, you may owe a lot of money and your equity may be very small. If you have the loan for a long time, or if your home’s value decreases, there may not be any equity left at the end of the loan.

In short, a reverse mortgage is a “rising debt, falling equity” type of deal. But that is exactly what informed reverse mortgage borrowers want: to “spend down” their home equity while they live in their homes, without having to make monthly loan repayments. There’s more about this important concept in an article called “A ‘Rising Debt’ Loan” in the Basics section of this site.

Exception

Reverse mortgages don’t always have rising debt and falling equity. If a home’s value grows rapidly, your equity could increase over time. Or, if you only get one loan advance and no interest is charged on it, your debt would never change. So your equity would grow as your home’s value increases. But most home values don’t grow at consistently high rates, and interest is charged on most mortgages. So the majority of reverse mortgages end up being “rising debt, falling equity” loans

If you have any questions regarding a Reverse Mortgage please feel free to call or email Tracy Kline one of our Reverse Mortgage specialist at Tracy@sequoiapacificmortgage.com     Or  Call 707-575-3220 ext. 203

Foreclosed? The tax man may want his cut

This is a very interesting article from CNN Money.com written by Les Christie regarding the tax consequences of either a short sale or foreclosure.

 

Foreclosed? The tax man may want his cut

By Les Christie, staff writer for CNN Money

April 15, 2011: 05:39 AM EDT

 

“Did you lose your house to foreclosure this year? Did your lender forgive some of your mortgage debt because the house sold for less than it the mortgage balance?

 If so, you could be facing a big tax hit.

 It is IRS policy to tax forgiven debt you are personally responsible for as if it is income. Say, for example, your credit card company settled a $10,000 debt for 50 cents on the dollar. You’d have a debt forgiveness of $5,000, which the IRS would count just like your wages.

 The same policy held true for most mortgage debt until 2007, when Congress passed the Mortgage Forgiveness Debt Relief Act. That ended the liability for many homeowners — but not all.

 In general, if you lose your home to foreclosure or short sale, where you sell your home for less than you owe, the IRS won’t add insult to injury by counting the difference as income, at least until 2012, when the act expires.

 There are four major exceptions to the rule:

 1. You did a cash-out refinance and splurged.

 Many homeowners took cash out when they refinanced their homes and used the extra dough to pay for new cars, boats, vacations or other spending.

 Say you did that and then got into trouble, losing the house through a foreclosure or short sale. Even if your lender waived the remaining debt, the IRS will treat as income the portion of the forgiven debt that you took out as cash and spent.

 Only the funds used to actually improve your home won’t be taxed (plus the costs of refinancing the loan). Yes, even if you spent the money on paying off your student loans or credit cards.

 The IRS’ reasoning is that only the money spent on home improvement actually added to your home’s value. And that, presumably, diminished the difference between what you owed on your mortgage and the value of your home when it was foreclosed.

 Beware: Some lenders made refinancing offers contingent on homeowners paying off credit card debt, according to Kent Anderson, a Eugene, Ore.-based attorney and tax expert. If you took one of those deals, the refinance money will be reported to the IRS and you will owe taxes on it.

 2. You have a home-equity line of credit.

 The same rules that apply to refinancings also apply to home-equity loans: The IRS will only forgive the tax liability if the loan money was spent on home improvements. And, tax experts advise, be prepared to show receipts to prove it.

 3. You lost your vacation home or investment property.

 So the market tanked and you lost your vacation home. Unfortunately, if you didn’t use it as your primary residence for at least two of the previous five years, you’re going to pay the tax man.

 More common, however, may be the case of investment properties gone sour. During the housing boom, buying homes for investment purposes soared, accounting for 28% of all sales during 2005, according to the National Association of Realtors. (Vacation homes made up 12%.) And many of these purchases were made with little down payment.

 When the bust hit, second home prices cratered. The median price for investment properties fell nearly in half to $94,000 by 2010, according to NAR. For vacation homes, the median price paid dropped 26% to $150,000.

 If an investor bought a property in 2005 at the median price and sold it in 2010, she could have run up almost $90,000 in forgiven debt. If she’s in the 25% tax bracket, that would add more than $22,000 to her tax liability. Ouch!

 4. You owned a multi-million-dollar home.

 It may be hard for Americans struggling in this weak economy to sympathize with anyone wealthy enough, at one time, to afford a multi-million-dollar home, but owners losing one could be on the hook for a huge tax bill.

 Only the first $2 million in forgiven debt will be voided under the relief act; all the overage is taxable as income.

 So, say, for example, you’re ex-ballpayer and self-styled stock-picker Lenny Dykstra and paid $18.5 million to Wayne Gretzky for a mansion in Thousand Oaks, Calif. When you defaulted on the loan in 2009 and the house was auctioned in 2010 for $10.5 million, you could be on the hook for $6.5 million of the $8.5 million in forgiven debt.

 Other ways out

 The good news? Even if you fall under any of these four scenarios, you may have a way out, according to Anderson. “If the taxpayer was insolvent at the time of the foreclosure, the forgiven debt can be excluded for tax purposes,” he said. “It can also be discharged in a bankruptcy and approved by court order.”

 People like Dykstra could elude taxes because California is a “non-recourse” state. Lenders there accept homes as the collateral for the debt and when a bank forecloses, the loan is regarded as paid in full. Since there’s no debt to forgive there’s no taxable income.

 It’s not always that simple, though. Many homeowners in California and other non-recourse states have refinanced their mortgages and refis are, as a rule, recourse loans, according to attorney Bill Purdy in Santa Cruz,. “A refi destroys your non-recourse status,” he said. If a big debt is forgiven, borrowers may owe taxes.

 Purdy also explained that banks often file 1099 forms with the IRS that mistakenly list debt forgiveness when there was none.

 ”People need to regard the 1099s with suspicion,” he said. “I’ve had clients in here who have been making payments to the IRS when they had non-recourse loans.”

 As long as the Mortgage Forgiveness Debt Relief Act stays in effect, only borrowers for the most expensive properties in foreclosure will have to worry. After that, though, it may pay for any homeowner in foreclosure to be very aware of their tax exposure — and plan accordingly.”

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“News from the Lending World” The Lending Rules Keep Changing

The Department of Housing and Urban Development (HUD) issued a Mortgagee Letter 11-10 on February 14, 2011. This letter states: “Given the legislative mandate that FHA’s Mutual Mortgage Insurance Fund (MMIF) remains financially sound, it is imperative the MMIF is further strengthened to ensure that FHA will continue its historic role of providing a home financing vehicle during periods of economic volatility and its mission of helping underserved borrowers.”

 In this imperative to strengthen FHA, effective April 18, 2011, there will be an increase in Annual Mortgage Insurance Premiums of one-quarter of one percent for forward mortgage amortization terms. This will result in a $10,000 to $14,000 reduction in purchasing power for FHA borrowers with tight debt-to-income ratios. What this means is when property values rise, FHA homebuyers will likely be priced out of the market sooner.

 Here are two examples of how the increase in FHA monthly mortgage insurance will work. For a property address with a FHA case number assigned to the property on or after April 18^th, on a $200,000 FHA loan amount – the monthly mortgage insurance premium will go up from $150 to $192 per month. On a $300,000 FHA loan amount, the monthly mortgage insurance premium will go up from $225 to $287.50 per month. And on properties that already have a FHA case number but the loan on that property cannot be funded for whatever reason prior to April 18th, then there will be an automatic FHA case number cancellation on that property. A new case number will have to be assigned to the property for FHA loan processing to continue.

For borrowers who already have a FHA loan, they will not be affected by this new monthly mortgage insurance cost.

 In addition, the U.S. Court of Appeals has lifted the temporary stay so that the Federal Reserve Board’s new TILA (Reg Z) Loan Originator Compensation Rule has gone into effect on April 6^th. Henceforth, residential loan originators are to be paid their origination fee either by the borrower or by the lender (in the form of YSP). The loan originator cannot receive compensation from both the borrower and the lender. The days of “double dipping” are over. I wrote about the pitfalls of double-dipping in a previous article. Also, the loan originator cannot make more money by pushing any particular type of loan (i.e., a more risky type). 

 Brokers must disclose upfront if their compensation will be borrower-paid or lender-paid. If it is to be a borrower-paid (fee based) loan for a purchase, the seller can choose to credit the buyer sufficient funds to pay the lender origination fee in its entirety. Seller credit cannot be used to pay for just part of the origination fee. It’s all or nothing. Again, this only applies to a borrower-paid plan. For a lender-paid plan, seller credit cannot be used to pay for origination fees. Period. End of story. On a lender-paid plan, no additional line item loan originator’s processing fee is allowed. On a borrower-paid plan, a processing fee can still be charged. On both types of lending plans, the lender’s underwriting fee is still there. That hasn’t changed.

 When a loan is needed for a purchase, it can get a bit tricky to pre-compute how much credit the seller and/or the loan originator can give to the buyer, based upon whether it’s a borrower-paid or a lender-paid lending plan. As a loan officer, one must be very careful not to leave any unused loan originator credit that was supposed to go to the buyer (from YSP) on the table. Before the new RESPA rules went into effect last January, the loan originator could actually pocket any extra YSP. Now, with the new Reg Z in effect, such monies go back to the lender under certain circumstances.

 Also, now a Safe Harbor/Anti-Steering form must be signed by the borrower, and the borrower must be presented with at least three loan options, one with the lowest rate, one with the lowest cost, and one without an adjustable rate, without a prepayment penalty, without a balloon payment, or other risky provisions. For the new TILA rule, HELOC’s are treated differently. They are considered to be open-ended consumer loans, like a credit card or a department store revolving line of credit. HELOC’s and Reverse Mortgages are not included in this new Reg Z rule.

 In order to be competitive, some loan originators in the past would initially under-quote fees to get the business. Then they would say that the cost went up. Henceforth, this practice of under-quoting is illegal. This should help level the playing field for consumers. On the downside, should a borrower now choose a lender-paid plan, that borrower would have to pay out of her or his own pocket for a lock-extension fee should the loan not close on time. Before this new rule went into effect, the mortgage broker often paid for the rate lock-extension.

 Also, in the past, a mortgage broker could initially disclose to the borrower that a certain YSP amount of money would be paid to the broker by the lender. Then, should more costs appear to the borrower than were originally anticipated, the broker could make adjustments so that extra credit could be given to the borrower from the broker’s YSP to lower the borrower’s Final HUD-1 closing costs and pre-paid items. Now, on a lender-paid lending plan, the Federal Reserve views this practice as an unlawful pricing concession. This is because, on a lender-paid plan, the originator’s compensation may not be increased or decreased when the loan amount remains unchanged even as the loan process progresses. Only with a borrower-paid plan can the loan originator’s compensation be reduced.

 The Federal Reserve governs TILA (Truth-In-Lending Act), and HUD governs RESPA (Real Estate Settlement Procedures Act). The Federal Reserve does not care how originator compensation is disclosed on the GFE (Good Faith Estimate) for RESPA purposes. And HUD does not care how the originator gets paid under TILA (Reg Z). The FTC (Federal Trade Commission) enforces TILA. Soon, we might be adding into the mix various implementations of new regulations from the Dodd Frank Act that was passed last year. Also, Elizabeth Warren, Chair of the newly formed Consumer Financial Protection Bureau, might way in with new regulations as well. All this should make for some very interesting times in the lending world.                     

Stay tuned.                                                                                                   

This article was written by Robert R. Fields CFP® here at Sequoia Pacific Mortgage. You can contact him at Robert@sequoiapacificmortgage.com or 707-575-3220

Good News for Spouses of Reverse Mortgage Holders

This is a great article written by

By RON LIEBER

“In the face of a lawsuit from the AARP Foundation, the Department of Housing and Urban Development has backed off an apparent policy change that was putting some widows and widowers on the brink of foreclosure.

The dust-up involves reverse mortgages, financial products that allow older Americans with a decent amount of home equity to tap some of that equity if they are at least 62 years old. Unlike a home equity loan, where you have to pay the money back, with a reverse mortgage the bank pays you, say in a lump sum or in monthly payments. Once you no longer live in the home, you or your executor (if you’re dead) sells it and pays the bank back.

The foundation and Mehri & Skalet, a law firm, sued HUD in the wake of a policy letter in 2008 that seemed to state that widows or widowers who were not listed on a spouse’s reverse mortgage would have to repay the full amount of the deceased spouse’s mortgage. They’d have to do so even if the home was worth less than the outstanding loan.

Not long after, some surviving spouses found themselves unable to pay off the loans or get a new mortgage for the outstanding balance on the old reverse mortgage. As a result, they ended up in foreclosure proceedings. The foundation had sued on behalf of three of them.

In a letter it released this week, HUD rescinded the 2008 letter. And while this week’s letter didn’t say so specifically, Jean Constantine-Davis, a senior attorney for AARP Foundation Litigation, reports that the lenders will now halt foreclosure proceedings against its three plaintiffs for the time being. A HUD spokesman did not return a call seeking comment.

The lawsuit is not over, though. The foundation hopes that a judge will confirm that HUD cannot ever force a widow, widower or heir to pay a reverse mortgage lender more than a home is actually worth, whatever the balance may be on the mortgage.

It also wants to establish surviving spouses’ right to stay in the home if they so choose, even if they weren’t party to the original reverse mortgage. That might mean that the lender is on the hook for the reverse mortgage loan longer than it expected to be. But Ms. Constantine-Davis said she thought that as the guarantor, HUD ought to buy the loans from the lender if this became a problem for the lender.

If that becomes too burdensome, HUD might make new rules that could, say, require that both spouses always be listed on the mortgage, while making some kind of provision for people who get married after one of them has gotten the reverse mortgage loan and wants to add a spouse to the mortgage.

Meanwhile, Ms. Constantine-Davis notes that HUD does not currently require both spouses to undergo counseling when only one of them applies for a reverse mortgage. (One spouse may apply alone because the monthly payout from the lender is usually higher if just the older spouse applies.) Without explicit counseling, spouses who are not on the mortgage may not know that they could end up in a situation like those of the plaintiffs in this case.

One easy fix might be for HUD to make both spouses come for counseling no matter what. Another, as I mentioned in a column a few weeks ago, is much simpler and doesn’t require more regulation: Don’t ever take yourself off the loan, even if it does mean that the payout is lower.”