The issues discussed in my February 2014 article regarding Reverse Mortgages and the Surviving Spouse are now being addressed in part by HUD in how the “non-borrowing spouse” is being treated.
The two significant changes have to do with:
1. HUD is changing the way the loan sizes are calculated for borrowers with younger “non-borrowing spouses” and;
2. Those widowed “non-borrowing spouses” will enjoy a new survivorship right of deferring the reverse mortgage repayment for as long as they remain in the home.
These change will take effect after August 4, 2014.
As an example: Micky, a 68 year-old man applies for a reverse mortgage. He has a 58-year-old spouse, Minnie, whom HUD defines as a “non-borrowing spouse” because she has not reached the minimum age of 62. Micky’s loan amount will be based on Minne’s age (58). Because Minnie is younger, the amount of Micky’s reverse mortgage will be smaller because of Minnie’s age. If Micky dies, predeceasing Minnie, under the new rule, Minnie has the right to remain in the home without having to repay the reverse mortgage until she herself permanently leaves the home, even though she was not a borrower named on the reverse mortgage. However, Minnie will not be allowed to draw down any reverse mortgage funds. Interest and FHA mortgage insurance premiums will keep accruing on the unpaid outstanding balance. Also, Minnie will assume the same home ownership responsibilities Mickey was subject to, namely, that she pay her property taxes and homeowner’s insurance, along with keeping the property in good repair.
Ms. MacDonald’s practice is limited to Estate Planning, Probate, Elder Law and Trust Administration. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 25115 Avenue Stanford, Suite B-124, Valencia, California. She can be reached at 661-294-6464.