Reverse Mortgage with a Younger Spouse

One of the rules on Reverse Mortgage is that, for married couples, both individuals must be at least 62 years old (or within six months of their 62nd birthday). Though a Reverse Mortgage can still be done for borrowers married to those who are referred to as "non-borrowing spouses," it has led to questions about the non-borrowers' rights as homeowners and problems with repayment when the named borrower passes away.

In the spring of 2011, AARP sued HUD on behalf of three parties who claim their homes went into foreclosure because they required to pay mortgage amounts exceeding the property's value - despite the Reverse Mortgage being a non-recourse loan.

With a Reverse Mortgage, borrowers must re-pay the loan only up to the value of the property; if the total loan amount due exceeds the property value, the excess amount is paid by HUD. Additionally, only the property itself can be used as collateral on the loan; borrowers are otherwise not personally liable. Because non-borrower spouses don't qualify as non-recourse borrowers, there can be problems for these spouses who want to stay in their home after the borrower passes away (or moves out of the home permanently, e.g. into a care facility).

On April 25, HUD released a mortgagee letter that included provisions to protect non-borrowing spouses for new Reverse Mortgages beginning August 4 of this year. Non-borrowing spouses who provide annual certification and related documentation will be able to defer the payment of the Reverse Mortgage loan should the borrower pass away.

This special circumstance may affect loan products and amounts available to borrowers with younger spouses, but HUD has not yet announced when these rates will be made available. Generally, borrowers with spouses younger than 62 may still want to wait to take a Reverse Mortgage if they can; one of the factors that can increase the loan amount available is to be older.

Have questions about Reverse Mortgages, including whether you can qualify if your spouse isn't yet 62 years old? Contact me by e-mail at ed.ramos@fpfmail.com or call me at 510-610-5223. I look forward to the opportunity to help you!