Non-Borrowing Spouses and HECM Counseling
HUD released Mortgagee Letter 2011-31, dated August 26, 2011, which alters the previous rule concerning counseling for spouses who will not be on the reverse mortgage loan.
Up to this point, HUD merely recommended that the non-borrowing spouse participate in the counseling session. Now HUD requires this participation. In cases where a power of attorney is present, the name of the Attorney-In-Fact must be entered at the top of the counseling certificate along with the name of the homeowner.
Certainly it is critical that the non-borrowing spouse understand the implications of the proposed loan. Among other issues, the non-borrowing spouse needs to realize that they will be quit-claiming off title for loan purposes, and they will not be able to return to title until the loan is paid off or they are eligible for a reverse mortgage and actually complete a refinance into a new reverse mortgage.
It is also important for them to understand that should the borrowing spouse pre-decease them, the loan becomes due and payable. There should be some kind of plan in place to address this possibility.
Certainly it is critical that the non-borrowing spouse understand the implications of the proposed loan. Among other issues, the non-borrowing spouse needs to realize that they will be quit-claiming off title for loan purposes, and they will not be able to return to title until the loan is paid off or they are eligible for a reverse mortgage and actually complete a refinance into a new reverse mortgage.
It is also important for them to understand that should the borrowing spouse pre-decease them, the loan becomes due and payable. There should be some kind of plan in place to address this possibility.
