Updated January 2022.
A non-borrowing spouse (NBS) is a spouse who is not a full borrower on a reverse mortgage loan agreement, but they inherit some key program protections if the older spouse passes away.
There are a few different reasons why a spouse might be a non-borrowing spouse, but the most common is age. The minimum qualifying age for a HECM reverse mortgage is 62.
Important new protections for the non-borrowing spouse (NBS)
The Department of Housing and Urban Development (HUD) made important changes to the HECM in April 2014 to better protect non-borrowing spouses. Prior to the change, only individuals over the age of 62 could be on the reverse mortgage loan agreement. This created a big potential pitfall for spouses younger than 62 if the older spouse passed away. The death of the older spouse triggered a maturity event that made the loan balance due and payable in full. The younger spouse (who was not on the loan agreement) had to either pay off or refinance the loan balance or be forced to give up the home.
Fortunately, HUD resolved this problem by creating new protections for non-borrowing spouses. Today, non-borrowing spouses can remain living in the home after the older spouse passes away without having to repay the loan balance. This so-called deferral period remains in effect as long as the non-borrowing spouse fulfills the program obligations, including living in and maintaining the home and paying the required property charges.
In 2021, deferral period eligibility was expanded to include non-borrowing spouses married to individuals who have lived in a health care facility for at least the last 12 consecutive months.
Also in 2021, HUD removed the requirement for non-borrowing spouses to establish marketable title or demonstrate their legal right to remain in the home following the death of the older spouse. This change makes it easier for non-borrowing spouses to establish their eligibility for the deferral period.
Though non-borrowing spouses can “inherit” the protections built into the HECM, they do not receive any remaining funds in the HECM. Any remaining term/tenure payments are discontinued and/or any available line of credit is closed out when the older spouse passes away.