Non-Borrowing Spouses and the AARP Ruling

Earlier this week a Federal court ruled against HUD in favor of two non-borrowing spouses (supported by AARP) and said that they do have rights to the home they agreed to deed off of in order to have their spouse obtain a reverse mortgage. The ruling says that HUD should have allowed the non-borrowing spouses to stay in the home even after the death of the borrowing spouse. The court ruled that HUD now needs to find a way to “fix” the problem. Many felt as though this was a victory for the borrowers. Non-borrowing spouses agree to come off of title to allow their spouse to obtain the reverse for reasons like the NBS is too young to qualify for the loan. The issue is that when you come off title and are not on the loan you lose rights to the home if something happens to the borrowing spouse. If you don’t have a backup plan and the equity is all gone that can force the NBS to leave the home and get nothing out of the sale.

While many thought this ruling might mean that lenders will still allow the Non Borrowing Spouse reverse mortgage loans and just make it so the NBS could still live in the home after the borrowing spouse dies, the opposite looks to be true. Recently a few more major lenders had agreed to start doing NBS loans with an attorney letter stating that the NBS acknowledges they no longer will have rights to the property. Today we received word that a couple of those lender and maybe all (soon) have decided to revert and no longer so NBS loans as a direct result of the Federal courts ruling. This will not affect loans in process but those who apply after the 14th of October. It looks as though the ruling that was supposed to assist NBS loans in the future has simply made lenders unwilling to do them. As of right now we still can assist with them but time is of the essence.  Call us today for a free consultation: 1.800.598.6265 or