One of the biggest questions we get here at Reverse The Nation is “What happens to my spouse who is too young to be on the reverse mortgage when I die?”
According to updated regulations from the Housing and Urban Development department “nothing” as long as the reverse mortgage was originated with AFTER August 4, 2014. As of August 4, 2014, non-borrowing spouses are allowed to keep the home and be protected under the same rules and regulations as the borrowing spouse.
Before August 4th, when the last surviving borrower passed away, heirs were required to either repay the loan, refinance the reverse mortgage, sell the home, or let the bank take it – even when those heirs included a spouse. Under new guidelines however; non-borrowing spouses will be allowed to continue to live in the home and still retain ownership, just as the borrowing spouse once did.
This regulation came about in response to a federal case that saw its way to Washington DC in 2014, along with similar cases that had popped up in previous years.
Under new guidelines, surviving non-borrowing spouses will be given 90 days to take over ownership of the home. This gives the spouse time to file necessary paperwork and take over the responsibilities of the reverse mortgage, which include continued payment of taxes and homeowners insurance coverage. As long as the surviving spouse does this, they will be able to live in the home for as long as they wish. They will also retain full rights over the property, including the right to upgrade, remodel, or sell the home.
With the new guidelines came some new requirements for lenders to perform their due diligence. This is to be sure the reverse mortgage balance does not outgrow the value of the property in the future, and to ensure the reverse mortgage is not being used to dodge creditors, the IRS, or other government liens. Those requirements force the lender to provide clear disclosures regarding the rights and responsibilities of the non-borrowing spouse, as well as the non-borrowing spouse needs to provide identification.
This is big news for those that are currently in a reverse mortgage with a non-borrowing spouse, or those that have been holding off on getting into the program because of an underage spouse. The concerns that existed before are no longer a concern, opening the door for senior homeowners to explore new retirement options.