Non-Borrowing Spouses Now Have Protections

Hello Julie, I think you need to know exactly where you stand and what rights you have, what obligations you do and don't have and what liability you ultimately have. I do need to ask a few questions though because some of the answers will depend on when the loan was closed and under what terms. When you say you are the non-borrowing spouse, are you an "eligible" non-borrowing spouse or an "in-eligible" non-borrowing spouse? Was the loan closed prior to January of 2015? HUD changed the rules in 2014 so that non-borrowing spouses no longer had to come off title so I would assume that you closed your loan prior to the change since as of the change non-borrowing spouse no longer had to be removed from title, but I want to be sure that I am giving you the correct info. If my premise is correct that you are an ineligible non-borrowing spouse, the loan is now due and payable if your spouse is no longer living in the property regardless of what you do. Changing the title doesn't affect your rights or obligations under the loan. You did not sign a Promissory Note agreeing to pay anything so you cannot be held liable for the obligation. And even if you had (which you did not), the reverse mortgage is a non-recourse loan. Which means that the lender has only one way to recoup their funds if the borrower does not repay the obligation and that is to foreclose on the property. They cannot seek payment from you, the borrower's estate, heirs or anyone else. If anyone is telling you that you are "responsible" for the loan, that simply is not true. By changing the title, you would have the option of selling the property though and that might be to your benefit. If there is equity remaining in the home, I would advise you to sell the home and take the money if you are now entitled to the ownership of the property. Any way you look at it, if the borrower is no longer living in the home, the loan becomes due and payable but if you are the rightful owner now and there is still money (equity) in the property, there is no reason you should not change the title and keep the money that is rightfully yours. If the lender takes the property in a foreclosure action, it would go to a Trustee's sale. Any bids at that sale that were above and beyond the amount owed to the lender would go to the property owner, but people who buy property at foreclosure sales do not typically bid properties up to their full values. If you can sell the home yourself, it is much more possible that you will walk away with more money in most cases. And what happens if you do transfer the title but then are unable to sell the home? As far as you are concerned, nothing more than what you are worried about now. The lender would eventually foreclose on the obligation and you would have to vacate the property. But that foreclosure action would not be against you and if you did not sign the legal documents, you would not even be named in the foreclosure. Only your deceased spouse and since there is no benefit or concern for credit from an individual who has passed, reverse mortgage lenders do not typically even report such actions to credit (the credit profiles obviously are not affected at that point). So yes, you can move at any time with no threat of collection actions, but you can also do that after the title changes and changing title does not encumber you or make you liable for the loan. Therefore, my suggestion would be to contact a local real estate professional to determine the most probable selling price for your home in its current condition comparing it to other similar homes that have sold recently in the area. Determine if there is anything to be gained by selling the home yourself and if there is, consider doing so before walking away from cash on the table.

Hello James, I would strongly suggest that you begin looking into the new loan as soon as possible. You will need to get a reverse mortgage refinance in your name as soon as the title passes to you and I think it would serve you well to know that the loan is available in advance. The property has probably increased in value and hopefully it is enough to give you the equity you need to get a new loan based on HUD's current parameters, but you really need to know and the sooner you know the better. It is possible that you may need to consider other alternatives as well such as a downsize or something else if the loan parameters available will not pay off the entire amount owed on the existing reverse mortgage loan. The sooner you know that better you can plan.

Hi Ray, That's a real shame that you did not receive this information sooner. You should have gotten this from the originator, and the counselor from the very beginning of the loan process so that the first time you heard about it was not at the closing. It is true, the non-borrowing spouse cannot be on the loan so she cannot be on title - at least for now. There is some talk that this may change in the future. For now though, you may record a Deed to add her back to title the cay after the loan closes. Not only is this not prohibited, your loan documents specifically have a provision for adding people to title without the loan being called due and payable as long as when you add her, you are still on title as well. If you replaced yourself with only her, that would be a different matter and would be a problem though. As a caution, make sure you have someone help you that knows how to record the Deed so that it is not a taxable event. You do not want the taxing authority to treat it like a transfer and trigger new taxes so you need to be sure you follow the procedures that will prevent any new taxation and those can vary from area to area so you need to check that out in your area before you make any moves.

Hi Johnny,The current rules do not affect the loans done prior to the new rules takingeffect.  The old guidelines did not take into effect the age of the younger,non-borrowing spouse in the benefit calculation and the new guidelines do.Therefore, the actuarial tables used to determine benefits would not bevalid for the older loans when just the older spouse's age was used todetermine the loan benefits.