New Options for Reverse Mortgage Non-Borrowing Spouses

New Protections for Non Borrowing Spouse

New Protections for Non Borrowing Spouse

For many years, non-borrowing spouses of reverse mortgage borrowers had few protections when the borrowing spouse passed away.

That’s because the reverse mortgage, and its terms, apply only to those people who are named on the home title. For some non-borrowing spouses, that has meant they are left to repay the loan, or leave the home, since the loan becomes due when the borrower passes away or moves from the home.

Until now.

What is a non-borrowing spouse?

Up until August, 2014, you could get a Reverse Mortgage only if all title holders were 62 years or older. If you were on title, then you were a reverse mortgage borrower and entitled to all of the benefits of the loan. If your spouse died, the reverse mortgage continued and the spouse could continue to live in the home and get all of the financial benefits of the loan.

However, some borrowers opted to remove spouses who were younger than 62 from the title. In these cases, some spouses could not continue to live in the home after the death of their husband or wife unless they could repay the reverse mortgage loan. The reverse mortgage came due when the borrower died.

A non borrowing spouse is someone who is under 62 years of age and married to someone interested in or getting a reverse mortgage.

New non-borrowing spouse protections – rights for those under 62

Last year, the Department of Housing and Urban Development, or “HUD,” which administers the government-insured Home Equity Conversion Mortgage program, made some changes to help the situation for non-borrowing spouses.

HUD said that as of August 4, 2014, any new non-borrowing spouses of reverse mortgage borrowers were eligible to defer repayment of the loans, under a few provisions including proof of their marital terms, and continuing to uphold the agreements of the loan.

That means for many non-borrowing spouses for loans taken on or after August 4, there are some protections that apply and can allow those spouses to remain the the home. They still must pay property tax and insurance on the home, as any borrower would.

But the new rules didn’t apply to borrowers who had taken out reverse mortgage previously, or their non-borrowing spouses.

I’m a non borrowing spouse. What does this mean for me?

If you are a non-borrowing spouse on a loan that was closed on or after August 4, 2014, you may be eligible to receive certain protections under the terms of your loan.

If you are a non-borrowing spouse on a loan that closed before August 4, 2014, it is important for you to contact your lender to learn more if this is the case, since these loans are handled on a case-by-case basis.

There are also stringent rules about the timing under which lenders can exercise this new option. HUD specifies that the option must be taken within 30 days of the servicer receiving notice of the borrower’s passing.

If you have a specific question about your loan or your situation, speaking with your loan lender or your loan servicer is a place to start.

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25 Responses to “New Options for Reverse Mortgage Non-Borrowing Spouses”

  1. 1 NowImScrewed

    You fail to mention that by getting a reverse mortgage you eliminate the possibility of using the home as collateral for long term care! My mother let her boyfriend talk her into a reverse mortgage so he could go on expensive vacations. The fees of the reverse mortgage increased the amount owed by over $500/ month. In just three years after receiving a fraction of what the house was worth at the time of the loan, my mother’s dementia made it impossible for her to live alone. as a result of the real estate crash and mounting fees of 7% interest and PMI insurance (that protects the bank not the borrower) the amount owed was $100,000 more than the value of the house. I I will be caring for my mother until she dies because there’s no money to pay for long term care!

  2. 2 Kim

    not sure what state you are in. My Mom has dementia where my sister talked her into a reverse mortgage. Stopped paying any kind of rent and proceeded to take Mom’s retirement funds to spend on expensive vacations (2 a year) and other personal items. She even had her will rewritten a 3rd time to remove me as co executor so I could not see what she was doing. With no assets or below $1200 (CA) Mom was placed on Medi-Cal. SS pays 2/3 and medi-cal picks up the remainder. CA has a new program for dementia patients due to the over taxing of skilled nursing homes. Once approved for this program a list is provided for us to check in hopes to find her a permanent home for Mom. I wish you the best and feel for the pain you are having to go through. It should never be this way should it?

  3. 3 lorelei

    The company I talked to (one of those with the high profile celebrity hyping this) said I had to put money in so that my equity was 40% of the home value. Good deal for them: They’re hoping as a senior I’ll die soon and they get a big payout, not my heirs.

  4. 4 JB

    reverse morgages are a very bad thing and should never be considered

  5. 5 Slowjoe

    Hi. I’m William Devane. I’ve been telling you for years about the opportunities in gold and silver. But, now that they’ve crapped out, they are an AMAZING opportunity to buy low–if you have any money left.
    What’s in YOUR piggy bank?

  6. 6 housingcounseling

    Actually, with 40% equity in the home, they would be paying off 60% of the value in whatever loans you currently have. I can’t say whether or not you would be able to get a reverse mortgage but the real problem is when people talk to lenders first instead of talking with a counselor. The lender’s job is to sell you a product. The counselor’s job is to provide all the information you need to be able to make the best, most informed decision for yourself (both pros and cons).

  7. 7 housingcounseling

    Not true. They are bad when used incorrectly. They can be very beneficial when used appropriately.

  8. 8 housingcounseling

    The real problem for both your mother and Kim’s was not a reverse mortgage per se. The real problem was financial abuse inflicted by a loved one. These situations should not happen but there is nothing a reverse mortgage counselor can do unless there is something obvious enough to be reported at the time of counseling. And as long as an individual is legally capable of making their own decisions, they have the right to make that decision even if it is not the best decision for them. I am sorry for what both of your families went through. You might want to speak with an attorney about the crimes that were committed against your mothers by family & friends.

  9. 9 TomJWhite

    Reverse mortgages are a financial cancer with the interest eating up your equity. Far better to sell your house, use the income from the proceeds to help pay rent and have the proceeds to pay for long term care if you ever need that.

  10. 10 LindaRobin

    Reverse mortgages are a scam. They only will give approximately half the equity in the house, and by the time interest and fees eat up the rest of it. Reverse mortgages are to be avoided. They were first authorized by President Reagan’s administration. What happens is, if the homeowner’s heirs don’t want the property, the lender has gotten a house at bargain basement rates.

  11. 11 LindaRobin

    housecounseling … No. JB is correct. Reverse mortgages are very bad and should never be considered.

  12. 12 housingcounseling

    So, tell me what is your level of expertise on these? I am a reverse mortgage counselor (not selling anything, looking out for the best interest of the client and work to help clients understand every possible benefit as well as every possible problem). I am a “subject matter expert” in the field and train counselors how to do the counseling so they can help clients understand the information enough to be able to make the best decision for themselves.

    And tell me why they are “very bad and should never be considered,” exactly what is “very bad” about them?

  13. 13 housingcounseling

    Not true! If a senior needs the funds out of a reverse mortgage to be able to continue living in their home, a reverse mortgage can provide those funds. Regardless of whether the heirs want the property or not, they retain any remaining equity in the home. Meanwhile the lender has lent money to the borrower, charged interest (as they would on any loan), paid the necessary insurance to ensure that even if the amount owed on the loan ends up being more than the home is worth at the time the loan comes due the heirs will never have to pay more that what the home can sell for. Again I ask, what is your expertise in this area?

  14. 14 Justsayin'

    I want to thank you for trying to enlighten us. I personally know of 2 cases of reverse mortgages that have been a real blessing. One, has outlived her “payments”… but still does not need to leave her home. She seems to have many years ahead of her, in good health. Another, had a fairly run down house in an expensive area,.. no money to fix it up. So with a reverse mortgage, she was able to update and repair her asset… her home. She is able in the meantime to use a little of the cash for enhanced daily living, while putting more of it away for later. If she needs to sell her home, because it was updated and repaired, it will be worth much more than before she got the loan. Meanwhile, she is able to put aside “tax, insurance and repair” money to be able to stay there indefinitely, even when the loan income has dried up. She too is quite healthy and expects to be there a long time. So like everything … even something as simple and mundane as a shoe… one size doesn’t fit everyone. But that size will fit someone. Thank you again.

  15. 15 housingcounseling

    I’m glad you know of these situations! There is also a payment plan where the borrower cannot outlive their payments. By taking a smaller monthly payment (based on assumption that the youngest borrower will live to age 100) the borrower will continue to receive that payment for as long as they live in the home, even if they live to be over 100 or if the value of the home plummets (as many did during the foreclosure crisis) and the loan balance can be much higher than the value of the home, or they may be keeping the loan balance lower by taking smaller payments (potentially retaining more equity for their heirs). Monthly payments of this sort are particularly helpful for someone who needs those extra funds for care that will allow them to stay in their home.

    These loans have the potential to be the best possible option for some folks but they do have the potential for misuse as well (when funds are absconded by family/friends or unscrupulous advisors; when the borrower cannot afford to maintain the home, pay property taxes and insurance; when the funds are used for extravagant pleasures without considering necessities first; etc.)

  16. 16 housingcounseling

    Despite the cost of a reverse mortgage, when used appropriately for the situation, it may actually allow a person to remain in their home for longer than the proceeds of a sale would allow them to pay rent.

  17. 17 DesertGal

    The one BAD thing about reverse mortgages is that not all elderly persons are able to obtain one. If they are living in an PAD which does not qualify for FHA financing then they are screwed. Your home must qualify for FHA if you want to do this type of “mortgage”.

  18. 18 James A. DeHart

    Appreciate any advice….am considering it, as I have a kid in college and am looking at retirement in the next yr or two.

    Thanks …. Jim

  19. 19 LindaRobin

    How much are you getting paid to pimp for reverse mortgages?

  20. 20 housingcounseling

    While such a rude and ignorant comment doesn’t deserve a response, you appear to have read my comment as carefully as you’ve investigated reverse mortgages. I don’t sell anything. You express the same attitude as someone who doesn’t know how to handle a credit card and than says that all credit is bad.

    I’m willing to entertain your critique of reverse mortgages but “Reverse mortgages are very bad and should never be considered” is not a critique and since you apparently can’t defend your position, you would rather try to attack me. The fact of the matter is that counselors are not allowed to give advice, only information. And most of us believe that we are only doing our jobs well when a good proportion of our clients decide not to get a reverse mortgage because by learning more about them in depth, the clients have decided that a reverse mortgage is not appropriate for them. We neither sell, nor advise about reverse mortgages, we provide information so that clients can make their own best decision.

  21. 21 housingcounseling

    Jim, you can find a reverse mortgage counselor by searching for “find a hecm counselor”, skip the ads and go to the HUD site. Counseling can be done either in person or over the phone. A counseling certificate is only good for 6 months so you don’t want to get counseling until you think you might be within that time frame.

    In the meantime, do some internet research but beware of the source of information. Most information you find on the internet is provided by lenders. Lenders are not evil, but they are in the business of selling loans (counselors are not selling anything and cannot actually advise you, they can only provide the information you need to help you make a more informed decision, and they are required to discuss possible alternatives to a reverse mortgage as well).

    The HECM is a HUD loan and HUD requires counseling by a counselor who has had training and passed a rigorous exam (both of which have to be repeated every 2-3 years to ensure the counselor stays up to date on changes). Yes, there is a cost for counseling (the amount and how it is charged varies by agency), this is because the agencies that do the counseling are non-profit housing counseling agencies and the real cost of the counseling is never fully covered even by fees and grants.

    I hope this helps.

  22. 22 James A. DeHart

    THANK YOU VERY MUCH, truly appreciate the advice, still employed and do not have a lot of time to waste, spend too much wasted time in a daily 3 hour commute.

  23. 23 housingcounseling

    Wow, I don’t envy you that commute!

    HUD does have some information on their website (under Home Equity Conversion Mortgages for Seniors), including links to publications from AARP & the National Council on Aging. These booklets can be helpful but they can also cause more confusion because of changes made to the program after they were published. The HECM program has had some drastic changes over the past couple of years, some of which are just beginning to be implemented. The risk of reading outdated materials always makes me hesitant to recommend them. In your situation it may help to learn some of the basic concepts through these materials if you don’t invest too much into the details and remain open to learning the new changes when you are ready to look into it further. Just don’t assume everything in them is correct.

    Good luck with your future decisions (and you’ll note that these materials reference other options to consider that may better meet your need as well).

  24. 24 privatedick

    Who pays your salary?

  25. 25 MensaBrite

    That’s like saying that buying a home should never be consdered! When you retire and your income drops, with a reverse mortgage, you can stay in that home is you have sufficient equity in it, and not worry about the payments on it till you die or move somewhere else.
    What I thing is the worst drawback is on purchases using a reverse mortgage, your sellers are prohibited from assisting you in paying closing costs. That eats away your equity right out of the gate. I think that should be corrected. As a former Realtor, many of my transactions were made possible by sellers paying some or all closing costs for buyers. Why restrict those using a reverse mortgage???

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