A Reverse Mortgage with a Non-Borrowing Spouse is Still a Possibility

Three years ago, complaints began to mount concerning the Department of Housing and Development’s treatment of non-borrowing spouses on a reverse mortgage.

Erica Jessup, program specialist at the HUD, said at the National Reverse Mortgage Lenders Assocationin 2010, “these borrowers were told the loan was assumable, or a loan officer said that it was alright to remove a spouse from title because they could refinance or add the spouse back to title later without any problem. We need to get the word out to our loan officers and counselors that they need to thoroughly explain the provisions of our mortgage”.

A year later, AARP took matters into their own hands by suing HUD, accusing them of abandoning rules and regulations set in place to protect non-borrowing spouses form evictions or foreclosures.

HUD clarified its “non-recourse policy” by stating, “The HECM is a ‘non-recourse loan.’ This means that the HECM borrower (or his or her estate) will never owe more than the loan balance or value of the property, whichever is less; and no assets other than the home must be used to repay the debt.”

Problems arised when the non-borrowing spouse had to pay the full loan amount after the borrowing spouse passed away. AARP argued, however, the non-borrowing spouses should be offered the same protections as borrowing spouses named on the title.

On Tuesday, when the NRMLA weighed in on the lawsuit, they provided examples such as borrowing spouses removing the non-borrowing spouse from the title to qualify to qualify for the reverse mortgage and avoid possible foreclosure. While the lawsuit was originally dismissed by the lower court, an appallant court later decided the case had standing in January, leaving the HUD to decide if it wants to appeal the decision or settle by revising the regulations for non-borrowing spouses.

This is where the importance of reverse mortgage couseling comes in. As a reverse mortgage company in Florida, we focus on making the borrowing process as easy as possible, but also as clear as possible, so that our clients aren’t caught off guard. At PS Financial Services, we are still offering reverse mortgages to borrowers with non-borrowing spouses and are firm believers in full disclosure so that when you meet with one of a consuelor or one of our brokers you are hearing everything twice. All our non-borrowing spouses are explained all details upfront, and they all understand the ramifications once the spouse passes away.