Understanding How a Reverse Mortgage Can Keep You at Home Longer As You Age (Part 2)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Elder Care Attorney

In part 1 of our series, we discussed recent changes made to the reverse mortgage program. Here in part 2 we will continue our discussion.

Non-Borrowing Spouses

A significant regulatory change that confronts a long-standing concern regarding HECMs (Home Equity Conversion Mortgage, aka “reverse mortgage”) addresses the issue of removing a spouse from a title as part of the HECM transaction (or lending to the only spouse who is on title). The “non-titled” or “divested” spouse is called the “non-borrowing spouse” (NBS).

Because all title holders on any home must be at least 62 years old, removing a spouse from title was usually done when that spouse was younger than 62. If the couple had other significant assets, life insurance on the borrower spouse, or a second home, the NBS could continue to live comfortably in the home if the HECM borrower spouse predeceased him or her.

For new HECMs there are now safeguards in place allowing the NBS to remain in the home without having to repay the HECM debt if the borrower spouse predeceases him or her. The NBS must continue to fulfill the ongoing mortgage requirements, which include paying real estate taxes, homeowners insurance, property upkeep, and maintaining the home as his or her primary residence. Under the new rule, the HECM does not have to be repaid until the NBS no longer resides in the subject property.

For HECM transactions involving NBS, the principal limit (initial borrowing capacity) is based on the younger NBS’s age, thus decreasing the borrower’s principal limit. The new NBS protection applies only to couples recognized as legally joined in marriage or a civil union, and is not extended to other relationships, familial or otherwise. Additionally, the couple must have been married at the time that the loan was consummated, they must remain married, and the NBS must reside in the subject property as his or her primary residence and attend the same HUD counseling session that HECM borrowers are required to attend.

To discuss your NJ Elder Care matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.