Non-Borrowing Spouses & Reverse Mortgages

Non-Borrowing Spouses & Reverse Mortgages

Hey everyone, Mortgage Nerd here! So, the reverse mortgage has something called a “Non-borrowing spouse rule”. So what’s a non-borrowing spouse? It’s kind of self explanatory, it’s one of the spouses that is not a borrower. But what does it mean in reverse mortgages? In 2008 when the market crashed, soon after as values started crashing, I would get calls from widows (typically women), could have been widowers. And they would say: “They’re kicking me out of my house, I have nowhere to go, I have no money, my house is upside down, I owe more than the value on the reverse mortgage that my husband took out, but didn’t put me on…” What happens is they would try to take more money, by using the older person, which typically in those cases was the male. When he passed away, the wife was not a borrower, not protected, not on title, therefore had to sell the house at a loss or walk away from it, and then had no money left over and nowhere to go, it’s very, very sad. I hated taking those calls and having to explain it to them, and hear those stories. So in 2016, FHA changed the rule, they said: “If you are a spouse that is under 62, (if you’re doing the FHA reverse mortgage) then you could be a non-borrowing spouse and be protected, you can stay on title, you can live in the home for the rest your life, even if you’re of age spouse, the borrower, passes away”. It also eliminated the ability for you to say: “Oh, husband is 80, wife is 70, and therefore we’re only gonna put the husband on, because we’re gonna get more money.” No, sorry, too bad, if you are married and you’re both living in the home, you must both be on the reverse mortgage, you must both be borrowers, this way there’s no issue like we had when the market crashed. So it’s a little synopsis of non-borrowing spouse rules, I did get a call from someone the other day, and the husband passed away, so the wife again is the non-borrowing spouse, and she’s not on title, she is not on the reverse mortgage, therefore she is not protected. There is a mortgagee optional election, where the mortgagee, which is the lender, can keep them in the home and not make them sell or anything like that, they have a formula they use, but like I told them, I said: “In your case, let’s see if we can refinance you on a property by yourself as a borrower, so there’s a guarantee to never be kicked out of the home with your own reverse mortgage.” So that’s the non-borrowing spouse rules. I’d be happy to answer any questions that go a little bit deeper into that, but I think it’s a pretty good synopsis of that rule on reverse mortgages. Mortgage Nerd out!