Protection for Surviving Spouse of Reverse Mortgage Holders

September 16, 2014
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The Department of Housing and Urban Development (HUD) established a new rule effective as of August 4, 2014 that aims to protect surviving spouses of reverse mortgage holders. In order to be eligible for a reverse mortgage, borrowers must be 62 years of age or older. Prior to the new rule put forth by HUD, a spouse who was under the age of 62 could not put their name on the loan. This became an overwhelming problem because when the spouse’s name who was on the mortgage passed away, the surviving spouse was left to either repay the loan in full or face being evicted from the home. Under the new rule, a spouse under the age of 62 can be listed on the loan as a “non-borrowing spouse.” With this rule in effect, the surviving spouse would be entitled to remain in the home with the obligation to provide documentation of their legal right to stay in the home within 90 days of the death. Appropriate documentation includes ownership document, a lease, or a court order. The surviving spouse will also be obligated to take on the responsibilities associated with a reverse mortgage, including paying property tax and insurance premiums. In addition, the surviving spouse is unable to access the remaining loan balance. Spouses who married the borrowing spouse after the mortgage was taken out are not protected under the new rule. This rule applies only to couples who were married at the time the loan was taken out. It is also important to note that this rule only applies to loans written after August 4, 2014.

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