Preparing HECM Non-Borrowing Spouses
Shannon Hicks -Reverse Mortgage Commentator
President: Reverse Focus, Inc. ? Video Commentator ? Blogger ? Podcaster ? Reverse Mortgage Enthusiast ? P: 800-805-9328
Reverse mortgage professionals may occasionally encounter a couple where a younger partner may need to be named as a HECM non-borrowing spouse (NBS). Even if you’re only closing an occasional HECM loan with a spouse under the age of 62, you should keep these guidelines in mind.
First: Know the NBS Guidelines.
Before you meet with a couple with one spouse under the age of 62 be certain that you have a thorough understanding of who is protected by HUD’s non-borrowing spouse policy, who isn’t, and what the homeowners must know before closing the loan.
Non-borrowing spouses typically do not meet the HECM’s minimum age of 62. However, there are other reasons one party may be designated as a NBS. In his 2024 edition of Understanding Reverse Dan Hultquist notes homeowners who have prenuptial agreements, homeowners who have remarried and want the home to be bequeathed to their biological children, or don’t plan on remaining married may opt for a non-borrowing spouse designation.?
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Two types of non-borrowing spouses
An Ineligible Non-Borrowing Spouse typically doesn’t live in the home that secures the loan, has no protections or allowances to remain on the property after the borrower passes away, and their age isn’t used in determining the HECM’s Principal Limit Factor (PLF).
An Eligible Non-Borrowing Spouse occupies the home with the borrowing spouse, has their age used to determine the HECM’s principal limit, and is protected after their spouse dies with a deferral period which postpones the loan being called due and payable.??
Before 2014 all spouses of a HECM borrower under 62 were ineligible non-borrowing spouses. Simply put, they had no protections that would allow them to remain in the home after the death of their spouse (primary owner). Their choices were to repay the balance owed or to sell the home and relocate when the loan became due and payable. Such circumstances lead AARP to lobby the Department of Housing and Urban Development to provide protections to prevent younger spouses of HECM borrowers from being displaced from their homes. In response, HUD issued Mortgagee Letter 2014-07 in April 2014 which introduced NBS protections.
Second: Plan Ahead
Couples naming a non-borrowing [CONTINUE READING ]