With Mortgagee Letter 2021-11 (ML 2021-11), HUD just issued some clarifications to reverse mortgage borrowers who obtained reverse mortgages when one spouse was not on the loan and was considered a non-borrowing spouse.
Prior to 2014 when HUD changed the rules, these spouses had no protections under the loan and after the 2014 changes, the “eligible non-borrowing spouse” designation came about with certain restrictions. The announcement helps borrowers who obtained their loans both before and after the 2014 rule changes.
Before 2014, non-borrowing spouses had no protection under their borrowing spouse’s reverse mortgage. If their spouse passed before them, the loan became due and payable at that time.
After the rule changes of 2014, eligible non-borrowing spouses had a deferral period that did not extend to borrowers who received their loans prior to that time and if their spouses passed before them, they could remain in the home under the terms of the loan if they changed the title to their name within an established timeframe and they met all the conditions that the borrowers of reverse mortgages also must meet.
However, non-borrowing spouses only qualified for the deferral period where the lender could not call the loan due and payable upon the passing of the borrowing spouse. If that spouse was still living but had to leave the home for assisted living, the non-borrowing spouse was not eligible for deferral.
With the 2021-11 Mortgagee Letter, HUD removed these issues for reverse mortgage borrowers. Now all eligible and previously ineligible co-borrowers of reverse mortgage borrowers are eligible for deferral upon the passing of the borrowing spouse and eligible for deferral if the borrowing spouse is forced to leave the home due to medical reasons.
This means that spouses of reverse mortgage borrowers who obtained their reverse mortgage prior to 2014 and were ineligible at the time the loan was closed, are now eligible for deferral coverage on the loan.
This does not mean that spouses of borrowers who remarried after the loan was closed are now covered. To be covered, you must have been the spouse of the borrower at the time the loan was originally closed, and you must meet the requirements HUD has placed on eligible non-borrowing spouses (you must occupy the home, you must continue to pay all property charges in a timely manner, and you must maintain the property in a reasonable fashion).
But you no longer need to have the title cleared in your name immediately, if your spouse is confined to a nursing facility for more than 12 months the loan will not be called due and payable, and you no longer need to refinance the loan to add your spouse if it was closed prior to 2015 (the changes for non-borrowing spouses were announced in 2024 but did not go into effect until early 2015).
(If you remarried after you closed your reverse mortgage, the only way to add a new spouse is still to refinance the loan with a new loan including your spouse.)
And you may still want to look at the current rates, and programs as you may be able to save a lot of interest accrual or get access to more money with a refinance transaction, but you no longer need to do it just to protect the spouse if he/she was your spouse at the time the loan closed.