Reverse mortgages are for many retired seniors a way to remain in their homes while using the equity to pay bills, take vacations, etc. Individuals who enter into reverse mortgage agreements are generally led to believe that surviving spouses are able to enjoy the same benefits, but this is not always the case. If you are considering a reverse mortgage, it is a good idea to speak with Bryan probate attorneys to make sure you fully understand the ramifications of this big step.
Why a Surviving Spouse May Face Foreclosure
Ideally, the reverse mortgage benefits both spouses. They enter into the agreement together, and when one spouse dies, the other is able to continue living in the home. In other words, the terms of the loan do not change upon the death of one spouse. It is only when the second spouse dies that the children and other heirs must either pay off the loan or sell the home. Unfortunately, this plan is not always realized.
The problem originates with the rule that all borrowers named on the reverse mortgage loan must be at least age 62. If a spouse is younger, she cannot be included in the agreement. When the older spouse dies, then, this younger spouse is left with only two options: pay off the loan or sell the home. If she elects to do neither the lender will foreclose on the property.
The American Association of Retired Persons (AARP) sued the Department of Housing and Urban Development in 2012 on this issue. At the time property nationwide had dropped in value significantly in the wake of the Great Recession, and therefore the U.S. District Court for the District of Columbia ordered that surviving spouses be allowed to remain in their homes and not be subject to foreclosure/eviction.
A Court Reversal
Two years after providing protections to surviving spouses with reverse mortgages the U.S. Court rescinded its ruling. In place of the 2012 protections HUD established a new rule. In essence, now when a couple seeks to take out a reverse mortgage and one party is under age 62, they may do so by listing the younger party as a non-borrowing spouse. Then, if the older spouse dies, the non-borrowing spouse may stay in the home, but cannot enjoy any remaining balance of the loan.
Consult an Attorney if You Are Considering a Reverse Mortgage
If you are interested in taking out a reverse mortgage, it is very important that you work with Bryan probate attorneys who will help protect your best interests. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.