What is the difference between an eligible and an ineligible spouse?
Great Question! Firstly, it’s not an eligible or ineligible “spouse”, but eligible and ineligible non-borrowing spouse. A non-borrowing spouse is one who is not going to be on the loan because they do not meet the HUD criteria to be a HECM borrower.
The eligible or non-eligible determination is whether or not they will be granted a deferral on the due and payable status when the borrower on the loan passes.
The reason we usually see a non-borrowing spouse is because the spouse is not yet 62 years of age and every reverse mortgage borrower under the HUD program must be at least 62 years of age and in that case, if they meet the other criteria, they would be an eligible non-borrowing spouse for loans closed now.
However, prior to the time HUD changed their rules in 2014, spouses of borrowers who were not on the loan when the loan was originated had no rights to remain in the home after the borrower passed. HUD changed that rule though and that change was announced in 2014, effective in early 2015.
Eligible = Protected for Deferral
Now spouses who are not on the loan at the time the loan is originated are either deemed eligible to receive a deferral when the borrowing spouse passes or ineligible based on several items.
An eligible non-borrowing spouse cannot access the loan after the borrower passes if there are still funds available on the line, but an eligible non-borrowing spouse can stay in the home for as long as he or she desires as long as they meet the eligibility criteria.
The eligible non-borrowing spouse must secure title to the property within 90 days of the passing of the borrower. We recommend that borrowers add the non-borrowing spouse back to title as soon as the loan closes so that there are no problems later. If it is done while both spouses are still alive, it is easier, there is no probate period and you do not have to worry about meeting the HUD 90 day rule later.
To be eligible, you must be married and living in the home at the time the loan closes and still living in the home as your primary residence at the time the borrowing spouse passes. And finally, the non-borrowing spouse has the same responsibilities as the borrower with respect to the fact that he/she must pay the taxes and insurance on time and maintain the home in a reasonable manner. An eligible non-borrowing spouse who does this can stay in the home for as long as he/she lives and wants to remain.
Ineligible = No Deferral Granted
Ineligible non-borrowing spouses might be those who don’t occupy the property (separated borrowers who do not live in the home), were not married to the borrower at the time the loan was closed, or because of familial or other issues cannot get title to the home, (perhaps the home goes to other heirs upon the death of the borrower). They would not be eligible for the deferral and therefore the loan would be due and payable upon the passing of the borrower. Hope this helps.