NON-BORROWING SPOUSE

A Non-Borrowing Spouse is a spouse or partner who is not a Borrower on the reverse mortgage contract.   Many couples were told to take one spouse off title (for a variety of reasons) to originate the reverse mortgage.  Lender's often told the couple not to worry their spouse could get right back on title and would still be protected.  

DO YOU KNOW 50% OF NON-BORROWING SPOUSES DO NOT MEET THE REQUIREMENTS TO REMAIN IN THEIR HOME FOR LIFE AND WILL FACE FORECLSOURE? 

Reverse Mortgage

WHAT YOU NEED TO DO TODAY:

Right now, today, while the Borrower is living make sure the Non-Borrower has legal authority to represent the Borrower's estate and has a legal right to remain in the property after the borrower's death (title to property). 

Get a Revocable TRUST,  Trustees and Successor Trustees have automatic legal authority and the ability to convey title (requirements to exercise the Non-Borrowing Spouse Option).  

Legal Authority and Transfer of Title varies State by State and the borrower should consult with an attorney to understand how to do this in the most cost effective way while the borrower is living. 

IMPORTANT NOTE:  If the borrower becomes incapacitated in your lifetime, has a will, or dies intestate the Loan Servicer will not allow the Non-Borrowing Spouse to exercise the right to remain in the property for life without a guardianship, probate or a court order.  The Non-Borrowing Spouse must have legal authority to represent the borrowers estate and convey title (legal right to remain in the property).  This is the main reason a Non-Borrowing Spouse will face foreclosure and eviction.  Trying to get legal authority after the Borrower dies can be very costly, time consuming and prevent the NBS from remaining in their property.

TIP:  I recommend Suze Orman's Must Have Documents which includes a Revocable Trust valid in all 50 States.

ADDITIONAL INFORMATION ABOUT THE NON-BORROWING SPOUSE:

On June 12, 2015 The Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2015-15, after years of litigation.  The intention of the court ruling (in favor of Non-Borrowing Spouses) was to allow the Surviving Non-Borrowing Spouse to remain in the home for life after the passing of the borrower.  

Mortgagee Letter 2015-15 - explain requirements and timeline for NBS Option. ML 2015-15 is vague and leaves the interpretation of the policy up to the individual Servicer. Consequently each servicer has different requirements to approve the Non-Borrowing Spouse (NBS) for the Mortgagee Optional Election (remain in the property for life). The one consistent requirement among Servicer's is the NBS must show they have a legal right to remain in the property and have legal authority to represent the Estate.

Non-Borrowing Spouse issues:  With the Release of the Mortgagee Letter HUD and the Servicer should have sent a notice to all Borrowers as to what they need to do to secure the NBS Option for their Surviving Spouse before the Borrower dies.  After the borrower dies it is often difficult, costly, and can even prevent the NBS from exercising the option to remain in the property for life.

The notice should say:

  1. The Borrower must provide legal authority for the NBS to represent the estate and the ability to convey title (upon death of the borrower).
  2. The borrower should change title to the property to include the NBS (before death).  Quit claim is a common way to do this.

If you are a same sex couple where one partner was a Borrower at loan origination and the other a Non-Borrower the Mortgagee Letter states you must have been in a committed relationship and occupy the property as your primary residence at origination.  In addition you must marry before the death of the borrower.  This applies even in States where same sex marriage was not legal at the time of origination.  

It's important for the Borrower and NBS to understand how to meet all the requirements of the NBS option in advance of the Borrower's passing.  The loan Servicer has the legal right to offer the NBS Option or Foreclose and will choose the easiest path.

TIP:  Request a copy of the Non-Borrowing Spouse requirements from your loan Servicer today while the Borrower is still living to make sure you understand all the requirements to protect the Non-Borrowing Spouse option.

HUD claims it is completely up to the Servicer to approve the NBS application (or to foreclose). BUT approx. 38% of servicer approved NBS applications submitted to HUD for assignment have been denied by HUD.  I believe this is against the intention of the court ruling and certainly is the opposite of HUD's public statement that it is completely up to the Servicer to approve the application for assignment.

At least another 15% of Non-Borrowing Spouses will have their application denied by the loan Servicer.