SFGate: Questions Persist for Reverse Mortgages

Americans who have a reverse mortgage solely in their name who are concerned about their spouse’s ability to remain in the home after their death have options, says San Francisco sister publication SFGate in a recent article.

“I have a reverse mortgage on my home in my name alone,” a reader tells SFGate. “The home is recorded in my living trust. My wife is the beneficiary of my living trust. Will she be able to remain in our home after my death and continue with the reverse mortgage benefits or will she have to sell the home within one year from my death?”

It depends, SFGate says, noting that most reverse mortgages are guaranteed by the Federal Housing Administration and known as Home Equity Conversion Mortgages (HECMs). Under the HECM program, mortgages are not due until the homeowner’s death, the sale of the home or certain other events.

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However, until recent changes, lenders could interpret HUD regulations to force the sale of a home upon the death of the borrower, even if a non-borrowing spouse remained in the home.

In 2011, the AARP Foundation filed a lawsuit on behalf of two non-borrowing surviving spouses who were in danger of foreclosure, arguing that the law allowed them to remain in their homes.

While HUD decided it was not required to provide relief for the two plaintiffs, the department did issue rules to fix the problem for new mortgages.

HUD’s new rules allow a non-borrowing spouse to remain in the home after the death of the borrower, as long as the spouses certify that they are married when the loan closes, SFGate advises.

Read the SFGate article here.

Written by Cassandra Dowell

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  • Of course, the issue is still a legal query and maze for those who are not covered under Mortgagee Letter (“ML”) 2014-07. The maze is how will HUD in its discriminatory enforcement of its prior policy treat a particular decedent spouse.

    But even spouses covered under the ML must be concerned about other forms of termination including the borrowing spouse living in a more appropriate living facility for more than 12 months for even medical reasons. There is little doubt that death of the borrowing spouse is the most frequent reason why non-borrowing spouses face HECM termination but it is not the only reason why non-borrowing spouses face HECM termination when the triggering event is not default of paying property charges or a change in title of the collateral which violates the terms of the HECM.

    While the ML provides help for the non-borrowing spouses it covers, it is not the complete or thorough answer for the concerns of the non-borrowing spouse. Without some significant form of title passing to the non-borrowing spouse following the demise of the borrowing spouse, non-borrowing spouses have no rights under the ML no matter what declarations are made at closing or thereafter.

    Non-borrowing spouses covered under the ML need to be certain they legally will be able to avail themselves of its benefits if the borrowing spouse passes away.

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