There are times when one is looking into a reverse mortgage but there is a spouse that is not 62. HUD implemented some options and protections for some non-borrowing spouses. Let’s take a look at what you need to know about the HECM Reverse Mortgages and Non-borrowing spouses.
A Non-Borrowing Spouse is the spouse, as determined by the state law where the spouse and borrower/ mortgagor live at the time of closing, but is not a borrower on the loan.
Non-Borrowing Spouses must comply with FHA’s requirements.
Non-Borrowing Spouses do not need to be 62 at the time of the closing, however, the amount of proceeds available are based on the age of the younger borrower or Eligible Non-Borrowing Spouse.
Non-Borrowing Spouses may qualify for a Deferral Period. The Deferral Period is the time following the death of the borrower during which the due and payable status is deferred for a Non-Borrowing Spouse.
For Non-Borrowing Spouses on loans as of April 25, 2014, the borrower must be legally married at the time of closing in order for the Deferral Period to apply.
In 2015 HUD clarified the eligibility of Non-Borrowing Spouses:
- An Eligible Non-Borrowing Spouse is one who is married to the borrower and occupies the home and has their age used for determining the principal limit or maximum claim amount of the loan. The Eligible Non-Borrowing Spouse maybe protected by the deferral period.
- An Ineligible Non-Borrowing Spouse is one who is married to the borrower but does not occupy the home and their age is not used for determining the principal limit or maximum claim amount of the loan. Ineligible spouses are not protected by the Deferral Period.
Borrowers and Eligible Non-Borrowing Spouses must respond annually to the marital status certificate and occupancy status certificate.
The Eligible Non-Borrowing Spouse must:
- Have been the spouse of a HECM borrower at the time of the loan closing and have remained the spouse of the borrower during of the borrower’s life.
- Have been properly disclosed at origination and named as a Non-Borrowing Spouse in the HECM loan documents.
- Have occupied, and continued to occupy, the property secured by the HECM as their Primary Residence.
If a divorce occurs, the borrower must provide a copy of the divorce degree. The Non-Borrowing Spouse is no longer eligible for protections and the Deferral Period and not required to provide the annual certificates.
The Deferral Period will not apply to anyone the borrower is not married to at the time of closing but marries in the future.
The home must be the primary residence of the borrower at the time of their death in order for the Eligible Non-Borrowing Spouse to qualify for the Deferral Period.
If the borrower dies before a Non-Borrowing Spouse, the due and payable status will be deferred as long as the Eligible Non-Borrowing Spouse continues to meet all the qualifying attributes and satisfies the requirements:
- Establish legal ownership or on-going legal rights to reside in the property secured by the HECM within 90 days from the death of the last surviving HECM borrower.
- Ensure all obligations of the HECM borrower(s) continue to be satisfied after the death of the last surviving borrower.
- Ensure that the HECM does not become due and payable for any other reason after the death of the last surviving borrower.
The due and payable status is in the Deferral Period only for the time the Non-Borrowing Spouse continues to meet all requirements of the loan and the property remains the Principal Residence of the Non-Borrowing Spouse. If any conditions cease to be met, the Deferral Period ends and the loan immediately become due and payable.
The HECM is non-assumable therefore the proceeds of the HECM are not available for use or disbursement to any Non-Borrowing Spouse during the Deferral Period.
- The HECM funds will only be made available during the Deferral Period for items specified in the loan documents, i.e., from Repair Set-asides for required repairs outlined during the origination period and required to meet FHA insurability and are satisfactory and completed during the established time frame. No unused funds will be disbursed.
The mortgage will continue to accrue interest based on the terms of the mortgage and loan agreement at the time of closing.
The FHA Mortgage Insurance Premium (MIP) will continue to be charged and sent to FHA.
If applicable, servicing fees will still be collected i accordance with the terms of the loan.
- When the Deferral Period ends and the loan is called due and payable, the interest, MIP and servicing fees if applicable, along with any proceeds received from the borrower during the term of the loan will become due.
Don’t run from a reverse mortgage if your spouse isn’t yet 62 but know HUD’s rules. Take time to understand and have the facts.
If you’d like to understand and get the facts on reverse mortgages? Contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.
For other states, contact your local reverse mortgage specialist who is a broker, one who works with several lenders, has their Broker License/NMLS and preferably holds the Certified Reverse Mortgage Professional (CRMP) designation.
© 2019 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648
This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: https://wp.me/p4EUZQ-2k7
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