As Complaints Increase, HUD to Address HECM Non-Borrowing Spouse Issue

During the National Reverse Mortgage Lenders Association’s Road Show, Erica Jessup, program specialist at the US Department of Housing and Urban Development said complaints about non-borrowing spouses being forced to move out of the home after the HECM borrower passes away are increasing.

“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,” said Jessup. “We need to get the word out to our loan officers and counselors that they need to thoroughly explain the provisions of our mortgage”.

While HUD couldn’t tell RMD how many complaints they’ve received, it’s enough that HUD has two efforts directed at the issue. First, HUD has drafted a proposed rule which is going through an internal clearance process to amend regulations relating to HECM Insurance. “The proposed rule creates a new definition for the term spouse to ensure that a husband or wife who is not an obligated party to the HECM loan transaction understands the consequences when the HECM borrower dies,” said HUD in an email to RMD.

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In addition, the soon to be released HECM counseling protocols will “specifically” advise counselors that if a client considers removing a younger spouse from title in order to be eligible, the counselor should caution the client about possible consequences for the non-borrower spouse. The counselor should also advise a client that the younger spouse may be added to a new HECM loan when he or she has reached the age of 62 via a HECM refinance.

However, the protocols warn that HECM refinancing is not guaranteed, and will depend on the eligibility of the clients and the equity in their property, as well as the availability of HECM loans said HUD. The protocols also caution counselors that during counseling, all parties must be made aware that the FHA-insured HECM cannot be assumed by the non-borrower spouse upon the HECM borrower’s death, or change of primary residence.

“In other words, the HECM becomes due and payable upon the HECM borrower’s death, or when the real estate, which serves as the security for the FHA-insured HECM, is no longer the primary residence of the HECM borrower,” said HUD spokesperson in an email to RMD.

According to Sue Hunt, reverse mortgage program manager at Consumer Credit Counseling Services in Atlanta, agencies are generally already addressing this during the counseling session required by HUD.

“Once a counselor on my team determines that there is a person living in the household, who is under age 62 and not on the deed, they would routinely talk about the effect of repayment of the loan on non-borrowing residents of the home after all borrowers have died or permanently left the home,” said Hunt. “We always strongly encourage non-borrowing residents, especially spouses, to participate in the counseling session.” Hunt added that the majority of lenders also require a non-borrowing spouse to fully participate in the counseling session as well.

Lenders are even taking it a step further according to Sherry Apanay, Executive VP of Generation Mortgage. The company requires all non-borrowing spouse’s attend counseling and execute a disclosure that explains everything to ensure there are no surprises.

RMD spoke with a couple counselors and each said borrowers are usually aware of the risk of having a non-borrowing resident with the HECM because the originator has explained it to them.

“Occasionally this information comes as a surprise to the wife, I can think of only two or three times when the husband said his wife was unavailable or he had already explained all this to his wife,” said Alan Stacy, a counselor with CCCS of Atlanta. “In this case, I counsel just the husband but recommend his wife call me to at least discuss her options.”

According to Stacy, sometimes even after explaining the consequences of removing a spouse from the loan, they decide to proceed.

“In one case I as able to help a couple save their home from foreclosure through my suggestion that only the husband (10 years older) get the reverse mortgage. The wife clearly understood the risks and said she’d be ready to move anyway after her husband died.”

So while HUD is concerned counselors and loan officers are not explaining the provisions of the mortgage well enough, all of our investigation shows the safeguards in place by lenders and counselors are already addressing the issue.

However, the new rule and protocol should help to ensure that these safeguards are being practiced everywhere.

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  • rainmand,rnrn(This comment is only about California community property and should NOT be considered as rendering legal advice.)rnrnSince approximately half of all marriages do not end in divorce, many of us have no direct personal experience in this regard. But most of us have seen or come from divorce situations. Some of us have even been directly involved in the process through our professional obligations and employment. For most even a divorce 22 years ago has a current impact or effect. rnrnTitle has to do with the presumption of ownership. A judge can determine actual ownership no matter whose name is on title. However, if there has been a conscious and identifiable act of transmutation and the status of that transmutation has not changed, the courts do recognize and uphold this provision of law. However, even transmutation can be undone by a later transmutation resulting from a conscious act to transmute or a failure in keeping its existing transmuted ownership.rnrnIn all likelihood, your judge believed that your former spouse did not transmute her interests in the community at the time you took title in your home even if you took title in your separate name. Most likely community assets were spent in the down payment, monthly payments, upkeep etc. Just as a community asset can be transmuted into separate property so also separate property can be transmuted into community property. Transmutation is a slippery slop. When it comes to separate property being transmuted into community, that can happen through a simple oversight in commingling separate property with community property. Except where recognized transmutation has occurred, the tendency of the courts is to find that property which has its source in community unless it can be clearly demonstrated that its source was separate and there has been no failure in keeping it separate. I presume your attorney did the best job he could based on the facts and circumstances of your case.rnrnIn California we also have a concept of quasi-community property. There is also a concept regarding splitting property into separate and community interests based on the contribution of each interest. It can become very confusing.rnrnThe application of facts to law can be a difficult process. This is why it is best if legal counsel advises on such issues. As the ol’ saying goes: “That is why they are paid the big bucks.”rnrnMy strong recommendation is that the spouses should be encouraged (not necessarily required) to seek separate legal advice when it comes to taking one spouse off of title. Such acts can end up in litigation especially in blended family situations where heirs inherit different interests in the estate or trusts of each spouse. This is why the proclivity of most lenders is to discourage spouses coming off of title even when additional proceeds may be obtained as a result.rnrn

  • >>It does not seem James is addressing the mortgage at all.rnrnI’m confused. I thought we were referencing the topic of this article, HECM’s with non-borrowing spouses. I could be off base – it’s obvious we’re travelling down different roads with this conversation.

  • James – what I learned, I learned from my Divorce Attorney. Since then I’ve read lots of Nolo Law books (designed for someone like me – a Layman) and confirmed what happened to me was proper and legal, and since then (22 years ago) has happened to lots of my friends and peers also.rnrnWhen I got a divorce, in California, I was the only person on Title and Mortgage. We lived in the house for 5 years before the divorce, and the Judge said the asset belonged to both of us, 50/50. Everything we aquired during the marriage was distributed like that, and my Attorney said the Judge did it like that because we’re in a community property State.rnrnSince then, lots of my friends and peers have gone through the same thing, and the results were the same.rnrnYou have lots of neat credentials, and I respect them. My expertise doesn’t exceed yours, but I’ve been there and one that and am communicating from genuine experience. Sometimes the schools of hard knocks is just as valuable as lots of neat credentials.rnrnWhere were you when I was going through my Divorce? I would have liked to introduce you to my Attorney.

  • rainmand,rnrnI read the thread very carefully and I do not believe that James Veale ever stated that the considerations are any different between types of mortgages. Can you cite where he does?rnrnIt does not seem James is addressing the mortgage at all. It seems he is addressing ownership. Debt and ownership are two different issues.

  • rainmand,rnrnCalifornia Family Code Section 850 reads:rnrnu201cSubject to Sections 851 to 853, inclusive, married persons may by agreement or transfer, with or without consideration, do any of the following:rnrn (a) Transmute community property to separate property of either spouse.rn (b) Transmute separate property of either spouse to community property.rn (c) Transmute separate property of one spouse to separate property of the other spouse.u201drnrnTransmutation is a long accepted principle in California law. It is recognized by the California Superior Court (and the California Supreme Court) even in divorce and marital property settlements. It is also recognized by the IRS and the California Franchise Tax Board.rnrnCalifornia community property law is much different than you seem to believe it is. This is why we all should advise customers to seek the advice of those who have the expertise to advise on such issues.rnrnWhile I was an active equity partner in a CPA firm, I was recognized by the Superior Court of California as an expert witness on property settlement matters; however, I never considered myself a legal expert on such matters. It seems you believe you are a legal expert.rnrnI hold active licenses as both a California CPA and a California real estate broker. It is clear you believe your expertise far exceeds mine. You are not the first. rn

  • >.Divorce is a very important consideration.rnrnThose considerations happen regardless of if it’s a Forward or Reverse Mortgage. And it doesn’t work like that in California. Community property States split all assets aquired during marriage 50/50. It doesn’t matter whose name is on Title when they file for divorce – that house is going to be split equally.

  • The NBS issue comes up from time to time and my company advises against it. Immediate foreclosure being an reasonable acceptance. We still have the NBS sign a document acknowledging the risks and our expressed advice not to proceed.

  • Shrode,rnrnThat is a great idea except the problem is what should that disclosure state? Few counselors or originators have the knowledge it takes to adequately advise on whether a spouse should go off title in order to obtain a HECM or other reverse mortgage. In all cases, borrowers who are comtemplating such moves should seek the advice of those who can provide it.rnrn

  • rainmand,rnrnDivorce is a very important consideration. If the transfer of title to the borrower is a simple transfer, there is a significant difference in how the court frames it. If the transfer is treated as a gift from the non-borrowing spouse to the borrowing spouse, the whole home would not be subject to settlement and would be treated as the separate property of the borrowing spouse. Imagine the impact on the non-borrowing spouse in that case.rnrnImagine if the home is granted to the non-borrowing spouse and that spouse is less than 62 with no significant other assets or income. All of a sudden that spouse must find financing. Divorces can be vehicles to achieve “vengeance” by one spouse against another.rnrnFinancial planning is a skill that only comes with extensive experience and education. Originators are well advised to refer borrowers to financial and legal advisers whether the originator believes he/she has such experience or not.rnrnI have only addressed the situation where both spouses share the same heirs. Imagine how complex the situation becomes when their heirs are different, especially in “blended families.”rnrnThose who advise on this subject need extensive experience and knowledge on such matters. Even those of us who do, rarely provide guidance in this area when we are originating a reverse mortgage and advise each spouse to consider seeking their own guidance.rnrnDon’t be fooled into the position that a living trust plus anything provides the ultimate answer. These are delicate issues that need the well thought out ideas of both parties with their legal and financial advisers.rn rnrn

  • Most, if not all, lenders include a notice for applicants regarding the purchase of annuities. A similar required notice written for applications with a non-borrowing spouse should be included. A notice of this kind, written in plain English, and requiring signatures would seem to eliminate the confusion. It shouldn’t only be the responsibility of the counselors.

  • Brian,rnrnI do agree with you. However, I was just wanting to compliment on what Sherry Apanay was doing as a company and to suggest other forms of insuring their would be no doubts left.rnrnYou are right, most lenders do require that the non-borrowing spouse be present during counseling as well as sign a non-borrowing spouse disclosure. In fact they all require it.rnrnTake care,rnrnJohn A. Smaldone

  • >>How does a living trust plus life insurance protect the non-borrowing spouse in case of divorce?rnrnWith divorce, it doesn’t matter if the couple has a Reverse or Forward Mortgage, both work the same and a non-borrowing spouse doesn’t impact the outcome. The divorce decree will legally divide all assets, and the homeowners will start new lives without each other.rnrn>>How does it protect the non-borrowing spouse if the borrowing spouse must be moved into long-term care outside the home with no ability to return even for a visit?rnrnIt doesn’t help in that scenario.rnrn>>There is no 100% cure rnrnAgreed. We do the best we can with the tools available and try to plug as many holes as possible. The important part is to review all the pros and cons, to enable the homeowners to make an educated and informed decision. And from now on, I’m going to get our conversation in writing because I don’t want a non-borrowering spouse to forget that conversation.

  • Linda,rnrnWho forbids you from advising your customer to seek out a CFP or other professional? If it is your employer, I strongly urge you to quit that employer immediately. If your employer merely requires that the employer be advised if you render such advice, that is an entirely different matter.rnrnMaking a general recommendation is much different than making a specific one. You need to stay away from referring borrowers to specific CFPs or other professionals in some states, like California.rnrnIn California you should never refer a borrower to a seller of financial or insurance products. If you do and the referred party makes a sale of forbidden insurance or financial products (or perhaps even refers them to someone who does), your action will treated as if you had sold the product directly to the borrower. I take it by the “92714” you use with your name that you are in California. Please see California Civil Code 1923.2(i)(1)(B) for specifics including timeframe.

  • rainmand,rnrnHow does a living trust plus life insurance protect the non-borrowing spouse in case of divorce? How does it protect the non-borrowing spouse if the borrowing spouse must be moved into long-term care outside the home with no ability to return even for a visit?rnrnWho owns the life insurance policy? If it is the borrowing spouse what prevents that spouse from changing beneficiaries? If the borrowing spouse is providing the funds for the non-borrowing to purchase it, what prevents the borrowing spouse from cutting those funds off? This could go on and on with real examples.rnrnThere is no 100% cure for this situation at all. But there are ways to help reduce some of the potential. But do not be deceived; there is no such thing as something that works every time.rnrnIt is odd that so many in this thread have put up a revocable trust as a permanent solution. All revocable trusts are just that — revocable in part or in their entirety.rnrn

  • You’re protecting the NBS’s ability to remain in the home. If the note becomes due, the NBS must pay or sell. Life insurance (already in existence would be helpful) is the only real “insurance” and in the Northeast should be at least $500,000 just in case. That way, the NBS has more chance of obtaining their own HECM that allots a credit line, not just a payoff. Don’t forget that not only does the note come due, but income will most definetly decrease putting into question can the surving spouse continue to afford. Much discussion should be had before this decision is made.

  • Ricky,rnrnIt is not just a matter of spending money but also the risk of lower home values and lower principal limits. Any comfort about a future refi is potential false hope. In 11 months a whole lot can happen. Just witness the 10% reduction to principal limits. Home appreciation in most areas of the country is not out of the woods just YET.

  • I imagine a life insurance policy could help protect the non-borrowing spouse yet we’re not allowed to suggest they talk with a certified financial planner or any professional. I do not sell any insurance or investment products but I am concerned about the risk to my clients.

  • Mel,rnrnHow is the non-borrowing spouse protected? rnrnThe life estate means the life tenant controls who lives in the home until the life tenant dies. So what happens to the non-borrowing spouse in case of divorce? That spouse will have a remainder right in the home but in most cases no place to live.rnrnAlso on the death of the life tenant, a reverse mortgage becomes due and payable if the life tenant is the only “borrower.” If the life tenant predeceases the non-borrowing spouse or must live outside the home for medical care for over a year, the reverse mortgage will become due and payable.rnrnWhile life estates help, they still leave the non-borrowing spouse very vulnerable.

  • what are you protecting if there is no equity left in the property after the passing of the qualified borrower? the life estate has no power over an underwater hecm loan. in some cases life insurance on the elder homeowner can be used to offset any shortage that may arise when the loan comes due for the younger spouse

  • I don’t understand how a Living Trust that’s combined with a Life Estate would protect the non-borrowing spouse. The note would still be due-and-payable after the borrowing spouse no longer occupies their home as a primary residence. rnrnThe only combination I’m aware of that works everytime, is when a Living Trust is combined with a Life Insurance policy on the borrowing spouse.

  • What about the situations where a living trust, with a life estate is in place to protect the non borrowing spouse. That is not contained in the discussion. How well trained are the counselors to understand different options, in different states? Is that placing too much on their shoulders?

  • >>and REQUIRED the NBS to attend counseling. Hopefully all originators do the same.rnrnEverybody has to do that. The non-borrowering spouse has to attend the EXACT SAME counseling session, and both have to sign the certificate. And every wholesaler I’ve used also have additional documents that have to be signed by the non-borrowing spouse.rnrnNon-borrowing spouses have to go through a lot to get a Reverse Mortgage.

  • I believe that every LO should go through training such as we have to do with the new NMLS, they sould be licensed specifically for doing the HECM.rnThis will weed out the LO’s that are doing it just for the commisson.

  • >>“We need to get the word out to our loan officers and counselors that they need to thoroughly explain the provisions of our mortgage”.

    The word is out, and has been out for a long time. When stories like this emerge, I wonder to myself “who are those Loan Officers that are doing that – and how many of them are there?” Everybody I know treats this subject properly.

  • Earlier this month I met one senior whom we are refinancing his current HECM into a new HECM and throughout the presentation, he kept referring to his current HECM as assumable. (He got his first HECM from one of the Big Three.) The odd thing was his wife was and will be a co-borrower on the HECMs.

    Although the senior finally understood that a HECM is not assumable, his insistence was astonishing. He explained that the prior loan officer had made it clear that a HECM was fully assumable. That part of the meeting was very, very odd.

  • Their are remedies that can be implemented to bring this problem under control or at least minimize the complaints.

    What Sherry Apanay said Generations is doing by having the spouse review and sign a disclosure explaining all the pro's, cons and consequences of coming off the deed to ensure there are no surprises. This may be one of the best ways to solve the problem.

    Other areas we can concentrate on is with proper training by companies to their loan officers. People in the field that are dealing with our seniors must be educated. We also must be aware of the loan officer that will say anything to make the sale. All the training in the world will not stop that. This is why I feel what Sherry Apanay of Generation Mortgage is doing is the most effective.

    Lenders can step up and start revising their brochures and flyers explaining the effects and consequences of removing a spouse from the deed will create. Their are things the industry can and should do. I agree with the statement made, we have the safe guards in place to a degree and we surly are aware of the issue.

    John A. Smaldone

      • Brian,

        I do agree with you. However, I was just wanting to compliment on what Sherry Apanay was doing as a company and to suggest other forms of insuring their would be no doubts left.

        You are right, most lenders do require that the non-borrowing spouse be present during counseling as well as sign a non-borrowing spouse disclosure. In fact they all require it.

        Take care,

        John A. Smaldone

  • I have a loan in where the couple have no choice, but to take the wife off. They have no money. She is disabled, and he is out of work. I explained how awful it could be if he dies, and she cant qualify for a reverse.Luckily there is only an 11 month gap between both of them. I advised them to make sure they do not spend the money follishly so they have the funds to bring to closing bc they will be short to close. With the YSP that is being paid everybody is trying to sell a reverse, and they have no clue how it works, There are a ton of shady loan officers out there. So this doesnt surprise me, but there are def borrowers who are aware, and pull the i didnt know card also. I am all for the counselors going into detail about this program. They should do it on every call bc if the loan is in a martial state the spouse even if coming off will still need to be on counseling.

    • Ricky,

      It is not just a matter of spending money but also the risk of lower home values and lower principal limits. Any comfort about a future refi is potential false hope. In 11 months a whole lot can happen. Just witness the 10% reduction to principal limits. Home appreciation in most areas of the country is not out of the woods just YET.

  • We have always warned prospective customers about the risk of non-borrowing spouses, and REQUIRED the NBS to attend counseling. Hopefully all originators do the same.

  • This is a huge issue. It is a difficult situation when the borrower wants to go ahead with it without the spouse and the spouse says that they understand the consequences, but you're not 100% sure they do. Ther have been several occasions where it made sense (e.g. home is in Foreclosure already) to do it, but it is always a tricky issue.

  • I believe that every LO should go through training such as we have to do with the new NMLS, they sould be licensed specifically for doing the HECM.
    This will weed out the LO's that are doing it just for the commisson.

  • >>and REQUIRED the NBS to attend counseling. Hopefully all originators do the same.

    Everybody has to do that. The non-borrowering spouse has to attend the EXACT SAME counseling session, and both have to sign the certificate. And every wholesaler I've used also have additional documents that have to be signed by the non-borrowing spouse.

    Non-borrowing spouses have to go through a lot to get a Reverse Mortgage.

  • What about the situations where a living trust, with a life estate is in place to protect the non borrowing spouse. That is not contained in the discussion. How well trained are the counselors to understand different options, in different states? Is that placing too much on their shoulders?

    • Mel,

      How is the non-borrowing spouse protected?

      The life estate means the life tenant controls who lives in the home until the life tenant dies. So what happens to the non-borrowing spouse in case of divorce? That spouse will have a remainder right in the home but in most cases no place to live.

      Also on the death of the life tenant, a reverse mortgage becomes due and payable if the life tenant is the only “borrower.” If the life tenant predeceases the non-borrowing spouse or must live outside the home for medical care for over a year, the reverse mortgage will become due and payable.

      While life estates help, they still leave the non-borrowing spouse very vulnerable.

  • I don't understand how a Living Trust that's combined with a Life Estate would protect the non-borrowing spouse. The note would still be due-and-payable after the borrowing spouse no longer occupies their home as a primary residence.

    The only combination I'm aware of that works everytime, is when a Living Trust is combined with a Life Insurance policy on the borrowing spouse.

    • rainmand,

      How does a living trust plus life insurance protect the non-borrowing spouse in case of divorce? How does it protect the non-borrowing spouse if the borrowing spouse must be moved into long-term care outside the home with no ability to return even for a visit?

      Who owns the life insurance policy? If it is the borrowing spouse what prevents that spouse from changing beneficiaries? If the borrowing spouse is providing the funds for the non-borrowing to purchase it, what prevents the borrowing spouse from cutting those funds off? This could go on and on with real examples.

      There is no 100% cure for this situation at all. But there are ways to help reduce some of the potential. But do not be deceived; there is no such thing as something that works every time.

      It is odd that so many in this thread have put up a revocable trust as a permanent solution. All revocable trusts are just that — revocable in part or in their entirety.

  • what are you protecting if there is no equity left in the property after the passing of the qualified borrower? the life estate has no power over an underwater hecm loan. in some cases life insurance on the elder homeowner can be used to offset any shortage that may arise when the loan comes due for the younger spouse

    • You're protecting the NBS's ability to remain in the home. If the note becomes due, the NBS must pay or sell. Life insurance (already in existence would be helpful) is the only real “insurance” and in the Northeast should be at least $500,000 just in case. That way, the NBS has more chance of obtaining their own HECM that allots a credit line, not just a payoff. Don't forget that not only does the note come due, but income will most definetly decrease putting into question can the surving spouse continue to afford. Much discussion should be had before this decision is made.

  • I imagine a life insurance policy could help protect the non-borrowing spouse yet we're not allowed to suggest they talk with a certified financial planner or any professional. I do not sell any insurance or investment products but I am concerned about the risk to my clients.

    • Linda,

      Who forbids you from advising your customer to seek out a CFP or other professional? If it is your employer, I strongly urge you to quit that employer immediately. If your employer merely requires that the employer be advised if you render such advice, that is an entirely different matter.

      Making a general recommendation is much different than making a specific one. You need to stay away from referring borrowers to specific CFPs or other professionals in some states, like California.

      In California you should never refer a borrower to a seller of financial or insurance products. If you do and the referred party makes a sale of forbidden insurance or financial products (or perhaps even refers them to someone who does), your action will treated as if you had sold the product directly to the borrower. I take it by the “92714” you use with your name that you are in California. Please see California Civil Code 1923.2(i)(1)(B) for specifics including timeframe.

  • >>How does a living trust plus life insurance protect the non-borrowing spouse in case of divorce?

    With divorce, it doesn't matter if the couple has a Reverse or Forward Mortgage, both work the same and a non-borrowing spouse doesn't impact the outcome. The divorce decree will legally divide all assets, and the homeowners will start new lives without each other.

    >>How does it protect the non-borrowing spouse if the borrowing spouse must be moved into long-term care outside the home with no ability to return even for a visit?

    It doesn't help in that scenario.

    >>There is no 100% cure

    Agreed. We do the best we can with the tools available and try to plug as many holes as possible. The important part is to review all the pros and cons, to enable the homeowners to make an educated and informed decision. And from now on, I'm going to get our conversation in writing because I don't want a non-borrowering spouse to forget that conversation.

    • rainmand,

      Divorce is a very important consideration. If the transfer of title to the borrower is a simple transfer, there is a significant difference in how the court frames it. If the transfer is treated as a gift from the non-borrowing spouse to the borrowing spouse, the whole home would not be subject to settlement and would be treated as the separate property of the borrowing spouse. Imagine the impact on the non-borrowing spouse in that case.

      Imagine if the home is granted to the non-borrowing spouse and that spouse is less than 62 with no significant other assets or income. All of a sudden that spouse must find financing. Divorces can be vehicles to achieve “vengeance” by one spouse against another.

      Financial planning is a skill that only comes with extensive experience and education. Originators are well advised to refer borrowers to financial and legal advisers whether the originator believes he/she has such experience or not.

      I have only addressed the situation where both spouses share the same heirs. Imagine how complex the situation becomes when their heirs are different, especially in “blended families.”

      Those who advise on this subject need extensive experience and knowledge on such matters. Even those of us who do, rarely provide guidance in this area when we are originating a reverse mortgage and advise each spouse to consider seeking their own guidance.

      Don't be fooled into the position that a living trust plus anything provides the ultimate answer. These are delicate issues that need the well thought out ideas of both parties with their legal and financial advisers.

  • Most, if not all, lenders include a notice for applicants regarding the purchase of annuities. A similar required notice written for applications with a non-borrowing spouse should be included. A notice of this kind, written in plain English, and requiring signatures would seem to eliminate the confusion. It shouldn't only be the responsibility of the counselors.

    • Shrode,

      That is a great idea except the problem is what should that disclosure state? Few counselors or originators have the knowledge it takes to adequately advise on whether a spouse should go off title in order to obtain a HECM or other reverse mortgage. In all cases, borrowers who are comtemplating such moves should seek the advice of those who can provide it.

  • The NBS issue comes up from time to time and my company advises against it. Immediate foreclosure being an reasonable acceptance. We still have the NBS sign a document acknowledging the risks and our expressed advice not to proceed.

  • >.Divorce is a very important consideration.

    Those considerations happen regardless of if it's a Forward or Reverse Mortgage. And it doesn't work like that in California. Community property States split all assets aquired during marriage 50/50. It doesn't matter whose name is on Title when they file for divorce – that house is going to be split equally.

    • rainmand,

      California Family Code Section 850 reads:

      “Subject to Sections 851 to 853, inclusive, married persons may by agreement or transfer, with or without consideration, do any of the following:

      (a) Transmute community property to separate property of either spouse.
      (b) Transmute separate property of either spouse to community property.
      (c) Transmute separate property of one spouse to separate property of the other spouse.”

      Transmutation is a long accepted principle in California law. It is recognized by the California Superior Court (and the California Supreme Court) even in divorce and marital property settlements. It is also recognized by the IRS and the California Franchise Tax Board.

      California community property law is much different than you seem to believe it is. This is why we all should advise customers to seek the advice of those who have the expertise to advise on such issues.

      While I was an active equity partner in a CPA firm, I was recognized as an expert witness on property settlement matters; however, I never considered myself a legal expert on such matters. It seems you do.

      I hold active licenses as both a California CPA and a California real estate broker. It is clear you believe your expertise far exceeds mine. You are not the first.

    • rainmand,

      I read the thread very carefully and I do not believe that James Veale ever stated that the considerations are any different between types of mortgages. Can you cite where he does?

      It does not seem James is addressing the mortgage at all. It seems he is addressing ownership. Debt and ownership are two different issues.

  • James – what I learned, I learned from my Divorce Attorney. Since then I've read lots of Nolo Law books (designed for someone like me – a Layman) and confirmed what happened to me was proper and legal, and since then (22 years ago) has happened to lots of my friends and peers also.

    When I got a divorce, in California, I was the only person on Title and Mortgage. We lived in the house for 5 years before the divorce, and the Judge said the asset belonged to both of us, 50/50. Everything we aquired during the marriage was distributed like that, and my Attorney said the Judge did it like that because we're in a community property State.

    Since then, lots of my friends and peers have gone through the same thing, and the results were the same.

    You have lots of neat credentials, and I respect them. My expertise doesn't exceed yours, but I've been there and one that and am communicating from genuine experience. Sometimes the schools of hard knocks is just as valuable as lots of neat credentials.

    Where were you when I was going through my Divorce? I would have liked to introduce you to my Attorney.

    • rainmand,

      Since half of all marriages do not end in divorce, many of us have no direct personal experience in this regard. But most of us have seen or come from divorce situations. Some of us have even been directly involved in the process through our professional obligations and employment. For most even a divorce 22 years ago has a current impact or effect.

      Title has to do with the presumption of ownership. A judge can determine actual ownership no matter whose name is on title. However, if there has been a conscious act and identifiable act of transmutation and the status of that transmutation has not changed, the courts do recognize and enforce this provision of law. However, even transmutation can be undone by a later transmutation resulting from a conscious act to transmute or a failure in keeping its existing transmuted ownership.

      In all likelihood, your judge believed that your former spouse did not transmute her interests in the community at the time you took title in your home even if you took title in your separate name. Most likely community assets were spent in the down payment, monthly payments, upkeep etc. Just as a community asset can be transmuted into separate property so also separate property can be transmuted into community property. Transmutation is a slippery slop. When it comes to separate property being transmuted into community, that can happen through a simple oversight in commingling separate property with community property. Except where recognized transmutation has occurred, the tendency of the courts is to find that property which has its source in community unless it can be clearly demonstrated that its source was separate and there has been no failure in keeping it separate. I presume your attorney did the best job he could based on the facts and circumstances of your case.

      In California we also have a concept of quasi-community property. There is also a concept regarding splitting property into separate and community interests based on the contribution of each interest. It can become very confusing.

      The application of facts to law can be a difficult process. This is why it is best if legal counsel advises on such issues. As the ol' saying goes: “That is why they are paid the big bucks.”

      My strong recommendation is that the spouses should be encouraged (not necessarily required) to seek separate legal advice when it comes to taking one spouse off of title. Such acts can end up in litigation especially in blended family situations where heirs inherit different interests in the estate or trusts of each spouse. This is why the proclivity of most lenders is to discourage spouses coming off of title even when additional proceeds may be obtained as a result.

  • >>It does not seem James is addressing the mortgage at all.

    I'm confused. I thought we were referencing the topic of this article, HECM's with non-borrowing spouses. I could be off base – it's obvious we're travelling down different roads with this conversation.

  • rainmand,rnrn(This comment is only about California community property and should NOT be considered as rendering legal advice.)rnrnSince approximately half of all marriages do not end in divorce, many of us have no direct personal experience in this regard. But most of us have seen or come from divorce situations. Some of us have even been directly involved in the process through our professional obligations and employment. For most even a divorce 22 years ago has a current impact or effect. rnrnTitle has to do with the presumption of ownership. A judge can determine actual ownership no matter whose name is on title. However, if there has been a conscious and identifiable act of transmutation and the status of that transmutation has not changed, the courts do recognize and uphold this provision of law. However, even transmutation can be undone by a later transmutation resulting from a conscious act to transmute or a failure in keeping its existing transmuted ownership.rnrnIn all likelihood, your judge believed that your former spouse did not transmute her interests in the community at the time you took title in your home even if you took title in your separate name. Most likely community assets were spent in the down payment, monthly payments, upkeep etc. Just as a community asset can be transmuted into separate property so also separate property can be transmuted into community property. Transmutation is a slippery slop. When it comes to separate property being transmuted into community, that can happen through a simple oversight in commingling separate property with community property. Except where recognized transmutation has occurred, the tendency of the courts is to find that property which has its source in community unless it can be clearly demonstrated that its source was separate and there has been no failure in keeping it separate. I presume your attorney did the best job he could based on the facts and circumstances of your case.rnrnIn California we also have a concept of quasi-community property. There is also a concept regarding splitting property into separate and community interests based on the contribution of each interest. It can become very confusing.rnrnThe application of facts to law can be a difficult process. This is why it is best if legal counsel advises on such issues. As the ol’ saying goes: “That is why they are paid the big bucks.”rnrnMy strong recommendation is that the spouses should be encouraged (not necessarily required) to seek separate legal advice when it comes to taking one spouse off of title. Such acts can end up in litigation especially in blended family situations where heirs inherit different interests in the estate or trusts of each spouse. This is why the proclivity of most lenders is to discourage spouses coming off of title even when additional proceeds may be obtained as a result.rnrn

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