Hi Dan,

You are asking exactly the right questions, and you are right to be concerned.  Let me work through each issue because a lot is going on here and some of it is urgent.

The common-law marriage question matters more than you might think

Texas does recognize common-law marriage, but it requires three things - an agreement between the parties to be married, living together as spouses, and representing to others that they are married.  If your brother and his significant other meet all three, they may have a valid common-law marriage under Texas law.

This matters enormously for the reverse mortgage because HUD has specific protections for Non-Borrowing Spouses.  For HECM loans with case numbers assigned on or after August 4, 2014, an Eligible Non-Borrowing Spouse has a Deferral Period after the last borrower dies.  That means the loan does not become immediately due and payable.  The NBS can remain in the home as long as they continue to occupy it as their principal residence, keep taxes and insurance current, and maintain the property.

The first thing they need to do is find out the FHA case number assignment date on the existing reverse mortgage.  If it was assigned on or after August 4, 2014, and if the common-law marriage can be documented and was properly disclosed at origination, your brother may already have NBS protections in place.  If the case number predates August 4, 2014, those automatic protections do not apply.

Get an attorney involved now

This cannot wait.  While both are alive and competent, an attorney can help with several matters at once.  First, formally document the common-law marriage.  Texas allows couples to file a Declaration of Informal Marriage with the county clerk, which creates a legal record.  Second, review the holographic will.  Texas does recognize handwritten wills, but they must meet specific requirements - entirely handwritten by the testator and signed.  An attorney can confirm it is valid and suggest whether a formal will would be stronger.  Third, explore whether a title transfer or trust structure makes sense to simplify the transition when the time comes.

Doing this now while both parties can sign documents is far easier than trying to sort it out through probate after she passes.

What happens when the loan becomes due and payable

When the borrower on a reverse mortgage passes away, the servicer sends a Due and Payable notice.  Your brother would have 30 days from that notice to communicate his intentions - whether he plans to sell, refinance, or invoke NBS protections if applicable.  Extensions are available up to 12 months total for someone actively working toward a resolution.  He would not be forced out immediately.

If he inherits the home through her will and the loan balance is less than the home's value, he can sell the home, pay off the reverse mortgage, and keep the remaining equity.  If he wants to stay, he would need to pay off the reverse mortgage - either with cash, a new forward mortgage, or a new reverse mortgage if he meets the eligibility requirements at that time.

If the loan balance exceeds the home's value, the non-recourse protection means he owes nothing beyond the home's value.  He could deed the property back to the lender and walk away with no personal liability.

On refinancing into a new reverse mortgage now

This is worth exploring while both are alive.  If they can document the common-law marriage and your brother is added as a co-borrower or properly disclosed as an Eligible NBS on a new loan, both of them would have full protection for life.  At 75 and 70, they would both qualify on age.  The home's current value - likely well above the $45,000 balance given comps at $200,000 or more - means there is likely significant equity available.

For the refinance to make financial sense under HUD's anti-churning rules, the increase in the Principal Limit must exceed the total transaction costs by at least 5 times.  Given the increase in home value since 2012 and the relatively small existing balance, that threshold is likely achievable.  A lender can run those numbers quickly.

On the home's appraised value

The CAD assessment and a market appraisal are two different things.  CAD values are used for tax purposes and frequently lag behind actual market values.  A licensed FHA-approved appraiser will look at comparable sales in the area, adjust for differences in condition, size, and features, and arrive at a market value opinion.   If the home needs repairs, the appraiser will note them and adjust accordingly - but actual market data, not guesswork, must support the adjustments.  If comps in the area are running $200,000 or more, a well-maintained version of the home could appraise in that range or higher depending on condition and what similar homes are selling for.

The bottom line

The most important thing right now is to involve an attorney to document the common-law marriage and review the will.  The second most important thing is to find the case number and date of the existing loan to determine whether NBS protections already exist.   And the third thing worth doing is having a lender run the numbers on a refinance that adds your brother to the loan so both of them are fully protected going forward.

Your brother is not necessarily facing homelessness - but the protection he needs requires action now, not after she passes.

Reference: HUD Handbook 4000.1, Section II.B.2.ii(B) - Non-Borrowing Spouse Requirements and Deferral Period (PDF pages 575-577).