The U.S. Department of Housing and Urban Development has just released a letter that will reduce the risk of foreclosures from the debt borne by surviving spouses in reverse mortgages.1 Reverse mortgages are advertised as a financing tool that allows seniors to remain at home for their lifetime. But once the borrower died, their surviving spouses were unexpectedly facing foreclosure.
The way it worked was that younger spouses were advised to quitclaim their interest in the home to their older spouses so that a greater amount could be borrowed. They were assured that they could remain in the property during their lifetime. However, upon the death of the borrowing spouse the survivor was told that the reverse mortgage was due and payable because the survivor was not a borrower under the loan. The surviving non-borrower spouse could not afford to refinance and foreclosure resulted.
