What If One Spouse Is Not 62 Years Old Yet?

While reverse mortgages are typically done jointly by both spouses in a couple, there are situations where both individuals may not be eligible. In situations like this, one spouse is named as the borrower, and the other is not included in the loan agreement. When the borrowing spouse faces certain circumstances, the non-borrowing spouse may have legal protections in place, subject to various factors.

In recent years, legal guidelines governing this scenario have evolved. Currently, all eligible non-borrowing spouses enjoy the same protections, regardless of when the reverse mortgage was initiated.

Who Qualifies as a Non-Borrowing Spouse?

As the term suggests, a non-borrowing spouse is married to a reverse mortgage borrower but is not formally part of the loan agreement.

Typically, a non-borrowing spouse is excluded from the loan because they do not meet the age requirement (62 years or older) for the Home Equity Conversion Mortgage (HECM) when the loan is originated.

For a non-borrowing spouse to be considered eligible for certain rights and protections, they must:

1. Participate in mandatory HECM financial counseling.

2. Be designated as a non-borrowing spouse on the loan documents.

3. Be legally married to the HECM borrower at the time of loan closing and maintain this marital status until the loan's maturity, usually upon the borrower's passing.

4. Reside in the home as their primary residence both at the time of loan closing and thereafter.

What Happens If the Borrower Moves or Passes Away?

When the borrowing spouse relocates to a long-term care facility for more than 12 consecutive months, the eligible non-borrowing spouse can remain in the home as long as the loan terms are met.

Normally, a reverse mortgage becomes due immediately upon the borrower's death. However, in the presence of an eligible non-borrowing spouse, the loan enters a deferral period during which the lender refrains from collection efforts, and the proceeds are frozen.

To maintain eligibility in such cases, the non-borrowing spouse must:

- Have been married to the borrower when the loan closed and remain married until the borrower's death or departure from the home.

- Ensure the HECM is not in default for any reason.

- Be formally designated as a non-borrowing spouse in the HECM documentation.

- Intend to continue living in the home as their primary residence.

- Continue paying for maintenance, property taxes, and home insurance.

Protections for Non-Borrowing Spouses

Recent HUD guidelines have significantly expanded protections for non-borrowing spouses, providing relief during the challenging times of a co-borrower's death or illness.

In 2014 and 2021, HUD issued Mortgagee Letters that granted non-borrowing spouses the following protections:

- Non-borrowing spouses are not required to provide documentation proving marketable title or legal rights to stay in the home.

- Protection is extended upon the borrower's death or if the borrower enters a long-term care facility for more than 12 months.

- In cases of same-sex couples, eligibility is extended to non-borrowing spouses who were in a committed relationship with the borrower but were unable to legally marry at the time of the HECM loan's origination. To qualify, they must have legally married before the borrower's death and remained married.

While these letters offer valuable safeguards, it is advisable to consult with an estate attorney, financial planner, or insurance agent to ensure proper protections for both you and your loved ones.

Ineligibility and Loss of Eligibility

Certain situations can lead to the loss of eligibility for non-borrowing spouses. These include:

- The non-borrowing spouse moving out of the home during the period of the reverse mortgage.

- Divorce between the borrower and the non-borrowing spouse after the reverse mortgage loan closes.

- Failure to meet HUD requirements, such as married couples not cohabiting in the primary residence, or a non-borrowing spouse not being formally listed on the reverse mortgage.

In conclusion, this article serves as general informational and educational content and should not be considered as financial or tax advice. To determine whether a reverse mortgage is suitable for your circumstances, consult an independent financial advisor. For tax-related concerns, seek advice from a tax professional.