Yes, a non-borrowing spouse can stay in the home after the borrowing spouse passes away, but only if they meet a strict set of rules set by the federal government. The primary conflict stems from a direct clash between U.S. law and a former agency rule. The federal statute that created the Home Equity Conversion Mortgage (HECM) program, 12 U.S.C. § 1715z-20(j), defines “homeowner” to include the borrower’s spouse, intending to protect them. However, for years, the Department of Housing and Urban Development’s (HUD) own regulation, 24 C.F.R. § 206.27(c)(1), ignored this and allowed lenders to demand full loan repayment upon the death of just the borrowing spouse, forcing thousands of surviving spouses into foreclosure.
This regulatory failure had devastating real-world consequences, contributing to a crisis where nearly 100,000 reverse mortgages have ended in failure, with foreclosures disproportionately impacting minority communities six times more often than predominantly white neighborhoods.
Here is what you will learn by reading this guide:
- 🏡 The Two Worlds of Spouses: You will understand the critical, unchangeable difference between an Eligible and an Ineligible Non-Borrowing Spouse and how this status, fixed on day one, determines your future in the home.
- ⚖️ The Court Case That Changed Everything: Discover how a landmark lawsuit, Bennett v. Donovan, forced a federal agency to rewrite its rules and create the protections that exist today for surviving spouses.
- 🗓️ Your Loan’s Birthday Matters: Learn why the date your loan’s FHA case number was assigned—specifically, before or after August 4, 2014—dictates which set of rules applies to you and the specific steps you must take.
- ✅ How to Secure Your Right to Stay: Get a clear, step-by-step checklist of the exact actions a surviving spouse must take to qualify for and maintain a “Deferral Period,” allowing them to live in the home for life.
- 🚫 Avoiding Catastrophic Mistakes: Uncover the most common and costly errors that can instantly disqualify a surviving spouse from all protections, leading to a loan default and foreclosure.
The Reverse Mortgage Machine: Who Are the Players and What Are the Parts?
To grasp how a spouse can be protected, you first need to understand the machine that is a Home Equity Conversion Mortgage (HECM). A HECM is not a traditional loan; it’s a unique financial tool designed for homeowners aged 62 and older to access their home’s equity without a monthly mortgage payment. The loan is repaid only when the last borrower leaves the home or passes away.
This system is a partnership between the government and private companies. The Federal Housing Administration (FHA), part of HUD, insures these loans. This insurance is the most important piece of the puzzle. It guarantees that if the home sells for less than the loan balance, the lender gets paid back in full by the FHA’s insurance fund.
This government guarantee, called a “non-recourse” feature, also protects the borrower’s family. It means the heirs will never owe more than the home is worth. Because the government takes on this risk, it gets to make all the rules, including the ones that protect—or fail to protect—a non-borrowing spouse.
The other key players are:
- Lenders: These are the FHA-approved banks and mortgage companies that give you the money.
- Servicers: After the loan is made, these companies manage it. They are who you or your spouse will deal with to report a death, submit paperwork, and ensure you are following the rules.
- Ginnie Mae: This government corporation bundles HECM loans into securities that are sold to investors, which provides the cash lenders need to keep making new loans.
- HUD-Approved Counselors: Before anyone can get a HECM, they must attend a counseling session with an independent, HUD-approved expert. This counselor’s job is to explain the risks and responsibilities, including the rules for a non-borrowing spouse.
The One Decision That Seals Your Fate: Eligible vs. Ineligible Spouse
In the world of HECMs, your status as a spouse is not just about your marriage certificate; it’s a rigid legal classification made at the moment the loan closes. This status can never be changed. Understanding this distinction is the single most important factor in determining whether a surviving spouse keeps their home or faces eviction.
A Non-Borrowing Spouse (NBS) is someone who is legally married to the HECM borrower when the loan is made but is not a borrower on the loan themselves. The most common reason for this is that the spouse is younger than the minimum required age of 62. In the past, couples were often encouraged to leave a younger spouse off the loan to qualify for more money, as the loan amount is based on the age of the youngest borrower.
This decision creates two possible paths, with dramatically different outcomes.
| Status at Loan Closing | Definition & Requirements | Consequence After Borrower’s Death | | :— | :— | | Eligible Non-Borrowing Spouse (ENBS) | You must be legally married to the borrower when the loan closes, live in the home as your main residence, and be officially named as an ENBS in the loan documents. Your younger age is used to calculate the loan amount, which means the couple gets less money upfront. | You can stay in the home for the rest of your life under a “Deferral Period,” as long as you continue to pay property taxes and insurance and meet other loan rules. You get no access to any remaining loan funds. | | Ineligible Non-Borrowing Spouse (INBS) | You are any spouse who does not meet the “Eligible” criteria. This includes anyone who marries the borrower after the loan closes, or a spouse who was not properly disclosed to the lender at the start. Your age is not used in the loan calculation. | The loan becomes immediately due and payable. You have no right to a deferral period and must either repay the entire loan balance or the lender will foreclose on the home. |
The Dividing Line in History: Why August 4, 2014, Is a Critical Date
The protections available to a surviving spouse depend entirely on when the HECM was originated. There are two separate sets of rules: one for loans with FHA case numbers assigned before August 4, 2014, and a different, more protective set for loans assigned on or after that date. This date is not arbitrary; it marks the moment HUD was forced to change its broken system.
Before this date, the rules were brutal and unforgiving. Federal regulation 24 C.F.R. § 206.27(c)(1) stated the loan was due the moment the last borrower died. There was no official protection for a non-borrowing spouse. Upon the death of their partner, the surviving spouse received a letter demanding hundreds of thousands of dollars, leaving them with the impossible choice of paying the full debt or facing foreclosure and losing their home.
This policy led to widespread displacement of seniors, often victimizing the very people the HECM program was meant to help. It was a predictable tragedy born from a rule that directly violated the law that created the program in the first place.
The Lawsuit That Forced HUD’s Hand: Bennett v. Donovan
The change in rules was not an act of goodwill by HUD. It was the direct result of a lawsuit filed by surviving spouses who were facing foreclosure, most notably in the case of Bennett v. Donovan. The spouses’ legal argument was brilliantly simple: they argued that HUD’s own regulation was illegal.
They pointed to the original 1987 law passed by Congress that created the HECM program. That law, 12 U.S.C. § 1715z-20(j), clearly states that a HECM loan cannot be called due until the “homeowner’s” death, and it explicitly defines “homeowner” to include the borrower’s spouse. The spouses argued that HUD’s rule, which triggered foreclosure on the borrower’s death, was a direct violation of this federal law.
In 2013, a federal court agreed. The U.S. District Court for the District of Columbia declared HUD’s regulation invalid and ordered the agency to create a solution that followed the law. This court order is the sole reason modern protections exist.
The Modern Solution for Post-2014 Loans: The Deferral Period
In response to the court’s order, HUD issued Mortgagee Letter 2014-07. This new rule applies to all HECM loans with case numbers assigned on or after August 4, 2014. It officially created the status of the Eligible Non-Borrowing Spouse (ENBS) and established a new protection called the “Deferral Period“.
The Deferral Period is a formal postponement of the loan’s due-and-payable status. It allows a qualifying ENBS to remain in the home after the borrower dies, but this protection is not automatic. The surviving spouse must meet a strict set of ongoing requirements to keep the deferral in place.
To maintain the Deferral Period, the ENBS must:
- Pay All Property Charges: You must pay all property taxes, homeowners insurance, and any HOA fees on time and in full. This is the most common reason a deferral fails.
- Maintain the Home: The property must be kept in good repair according to FHA standards.
- Live in the Home: The house must remain your principal residence. You cannot be absent for more than 12 consecutive months, even for medical reasons, without risking the loan becoming due.
- Certify Annually: You must sign and return a certification form to the loan servicer every year confirming you still meet all the rules.
Crucially, during the Deferral Period, the surviving spouse has zero access to any remaining HECM funds. If there was a line of credit, it is frozen forever. If there were monthly payments, they stop immediately. The loan balance continues to grow as interest and insurance premiums are added each month, eating away at the home’s remaining equity.
The Patchwork Fix for Pre-2014 Loans: The MOE Assignment
The new Deferral Period rule only applied to new loans, leaving thousands of spouses on older loans still vulnerable. To address this, HUD created a separate, more complicated fix for loans originated before August 4, 2014. This solution is called the Mortgagee Optional Election (MOE) Assignment.
Under the MOE process, the lender has the option to assign the old HECM loan to HUD instead of foreclosing after the borrower dies. If the lender chooses to do this and the surviving spouse qualifies, HUD takes over the loan and allows the spouse to stay in the home under the same conditions as a Deferral Period. The word “optional” was a major source of fear, as a spouse’s fate depended on the lender’s choice.
To qualify for an MOE Assignment, the surviving spouse on a pre-2014 loan must meet similar criteria:
- They must have been married to the borrower at closing and remained married.
- They must live in the home as their principal residence.
- The loan cannot be in default for other reasons, like unpaid taxes.
The Great Unifier: How a 2021 Rule Change Fixed the Biggest Problems
For years, the system remained fractured and confusing, with different rules for different loans. A major roadblock for spouses on both old and new loans was the requirement to get “good and marketable title” to the property within 90 days of the borrower’s death. This legal hurdle was nearly impossible for many grieving spouses to overcome, as probate court can take many months or even years, leading to needless foreclosures.
Recognizing this failure, HUD issued Mortgagee Letter 2021-11 on May 6, 2021. This was a landmark update that harmonized the rules and fixed the biggest remaining problems for all HECM non-borrowing spouses, regardless of the loan’s date.
The two most important changes were:
- The “Marketable Title” Requirement Was Eliminated: This was the single most important fix. Surviving spouses no longer need to go through a lengthy and expensive legal process to prove ownership to keep their home. This change recognized that the federal right to occupy the home is separate from state inheritance laws.
- Protections Were Extended to Long-Term Care Situations: The rules were expanded to protect a non-borrowing spouse if the borrower moves into a healthcare facility, like a nursing home, for more than 12 consecutive months. The Deferral Period can now begin when the borrower moves to long-term care, not just after they die, preventing a health crisis from becoming a housing crisis.
Real-World Outcomes: Three Common Scenarios
These rules can be confusing, so let’s look at how they play out for real families.
Scenario 1: The Couple Who Planned Ahead
John (72) and Mary (61) want a HECM. Because Mary is not yet 62, she is designated as an Eligible Non-Borrowing Spouse on their 2022 loan. They accept that this means they will get less money from the loan because the calculation is based on Mary’s younger age.
| The Event | The Result for Mary |
| John passes away in 2025. | Mary notifies the loan servicer. The loan enters a Deferral Period. She continues to live in the home, paying the property taxes and insurance. The HECM line of credit is frozen, and she cannot access any more money. |
Export to Sheets
Scenario 2: The Second Marriage Trap
Robert (75) gets a HECM in 2019 while he is single. In 2021, he marries Susan (71). They do not refinance the HECM. Susan is automatically an Ineligible Non-Borrowing Spouse because she was not married to Robert when the loan was made.
| The Event | The Result for Susan |
| Robert passes away in 2025. | The loan becomes immediately due and payable. Susan has no right to a Deferral Period. She must either find a way to pay the full loan balance (over $200,000) or the lender will foreclose and she will be forced to move out. |
Export to Sheets
Scenario 3: The Pre-2014 Loan and the New Rules
David got a HECM in 2012. His wife, Helen, was 59 at the time and was not a borrower. David passes away in 2023. Because the loan is from before August 4, 2014, Helen’s protection depends on the MOE Assignment process.
| The Event | The Result for Helen |
| Helen immediately contacts the loan servicer after David’s death. | Because of the new rules from Mortgagee Letter 2021-11, the servicer initiates the MOE Assignment. They do not require Helen to get marketable title. The loan is assigned to HUD, and Helen is allowed to stay in the home as long as she pays the property charges. |
Export to Sheets
Do’s and Don’ts for Couples Considering a HECM
Navigating these rules requires careful planning from the very beginning.
| Do’s | Don’ts |
| ✅ DO disclose your spouse to the lender from day one. Hiding a spouse’s existence to get more money is fraud and will guarantee they have no protections. | ❌ DON’T assume protections are automatic. A surviving spouse must be proactive, contact the servicer, and submit paperwork to secure their rights. |
| ✅ DO attend the HECM counseling session together. This is your best chance to ask an independent expert about the specific risks and benefits for your family. | ❌ DON’T remove a spouse from the property title to get the loan. Modern rules allow a non-borrowing spouse to remain on the title. |
| ✅ DO plan your finances for the long term. A surviving spouse must be able to afford taxes and insurance for potentially decades without help from the HECM. | ❌ DON’T get married after the loan is in place and expect the new spouse to be protected. They will be an Ineligible NBS unless you refinance the entire loan. |
| ✅ DO organize your documents. A surviving spouse will need easy access to the marriage certificate, loan documents, and the borrower’s death certificate. | ❌ DON’T ignore mail from the loan servicer. The annual certification form is mandatory, and failing to return it can trigger a default and terminate the deferral. |
| ✅ DO consult an elder law or estate planning attorney. A lawyer can help you understand how the HECM interacts with your will, trust, and state inheritance laws. | ❌ DON’T forget about property maintenance. Letting the home fall into serious disrepair is a loan default that can lead to foreclosure, even if taxes are paid. |
The Trade-Offs: Pros and Cons of Designating a Non-Borrowing Spouse
Choosing to list a younger spouse as an Eligible Non-Borrowing Spouse involves a significant trade-off. You are exchanging immediate cash for future security.
| Pros and Cons of the ENBS Designation |
| Pros |
| 👍 Ultimate Peace of Mind: The single greatest benefit is ensuring your spouse will not be displaced from their home after you are gone. This is the core purpose of the protection. |
| 👍 Protection from Health Crises: The deferral now covers situations where the borrower moves to long-term care, preventing a medical crisis from forcing the healthy spouse out of the home. |
| 👍 Avoids Forced Sale: The deferral prevents the loan from becoming due, giving the surviving spouse stability and avoiding a stressful and potentially costly forced sale of the property. |
| 👍 Simplified Process: Recent rule changes have removed the biggest administrative hurdles, like the marketable title requirement, making it easier for a grieving spouse to secure their rights. |
| 👍 Keeps the Home in the Family Longer: The deferral allows the home to stay with the surviving spouse for their entire life. Heirs only have to address the loan after the second spouse passes away. |
Mistakes to Avoid: How to Lose Your Home in a Deferral Period
Even with an Eligible Non-Borrowing Spouse status, you can still lose the home. The Deferral Period is a conditional privilege, not an unbreakable right. Here are the most common mistakes that will terminate the deferral and trigger a foreclosure.
- Mistake #1: Failing to Pay Property Taxes or Insurance. This is the number one killer of deferrals. The loan servicer monitors tax and insurance payments. If you miss a payment, you are in default, the deferral ends, and the loan becomes due.
- Mistake #2: Not Living in the Home. The property must remain your primary residence. If you move out, rent the property to someone else, or are absent for more than 12 months, you violate the terms. The servicer will terminate the deferral.
- Mistake #3: Ignoring the Annual Certification. Every year, the servicer will mail you a form to sign, certifying that you still live in the home and meet the deferral conditions. Tossing this in the trash is the same as telling the lender you’ve moved out. They will start the process to call the loan due.
- Mistake #4: Selling or Transferring the Title. The deferral only lasts as long as you are a qualifying spouse living in the property. If you sell the home or transfer the title to your children, the loan becomes immediately due and must be paid from the sale proceeds.
- Mistake #5: Remarrying. This is a gray area, but remarrying after the borrowing spouse’s death can be interpreted by the servicer as a change in status that terminates your eligibility for the deferral. You must clarify this with the servicer before remarrying.
Your Step-by-Step Guide to Securing the Deferral Period
When the borrowing spouse passes away or moves to a long-term care facility, the surviving spouse must act quickly and correctly. Do not wait for the servicer to contact you.
Step 1: Gather Your Documents (Within the First Week) Your first task is to locate the essential paperwork. You cannot proceed without it.
- The Borrower’s Death Certificate: You will need a certified copy. Order several from the funeral home or vital records office.
- Your Legal Marriage Certificate: This proves you were married at the time of the loan closing.
- The HECM Loan Documents: Find the original loan agreement, note, and mortgage or deed of trust. These documents contain the loan number and the servicer’s contact information.
- Proof of Your Identity: Have your Social Security number and a government-issued ID ready.
Step 2: Make the Official Notification Call (Within 30 Days) You must formally notify the loan servicer of the borrower’s death.
- Find the Servicer’s Phone Number: It will be on the monthly statements or original loan documents.
- Make the Call: When you call, state clearly: “I am calling to report the death of the borrower,, on HECM loan number [Loan Number].”
- Identify Yourself: State that you are the surviving Eligible Non-Borrowing Spouse who was named in the original loan documents.
- Ask for the Deferral Package: Tell the representative you wish to initiate the Deferral Period and ask them to mail you the required certification forms and a list of all necessary documentation. Get the representative’s name and a reference number for your call.
Step 3: Submit the Required Paperwork (Promptly) The servicer will send you a package of forms. Fill them out completely and return them as soon as possible, preferably by a trackable delivery method like certified mail.
- The Death Certificate: Include a clear, certified copy.
- The Initial Certification Form: This is a document where you formally attest, under penalty of perjury, that you meet all the conditions of an ENBS. You will certify that you were married at closing, remained married until death, and continue to live in the home as your principal residence.
- Other Required Documents: The servicer may ask for a copy of your marriage certificate or other proof of occupancy. Send exactly what they ask for.
Step 4: Fulfill Ongoing Obligations (Continuously) Once the Deferral Period is approved, your work is not done. You must now perform the duties of the borrower for the rest of your life.
- Pay Taxes and Insurance Without Fail: This is your most important job. Set up reminders or have the bills sent directly to you.
- Maintain the Property: Keep the home in good condition.
- Complete the Annual Certification: Every year, like clockwork, you will receive a new certification form in the mail. You must sign and return it promptly to prove you still live in the home and qualify for the deferral. Failure to do so is a default.
Frequently Asked Questions (FAQs)
- If my spouse is under 62, can we still get a reverse mortgage? Yes. Your spouse can be named an “Eligible Non-Borrowing Spouse.” This protects their right to stay in the home but will reduce the total loan amount you can receive.
- Can I add my new spouse to my existing HECM if I remarry? No. A spouse from a marriage that occurs after the loan closes is an “Ineligible Non-Borrowing Spouse” with no protections. You would have to refinance the entire loan to include them.
- As a surviving spouse, can I use the money left in the line of credit? No. The moment the borrower dies, all remaining HECM funds are permanently frozen. A surviving spouse has no access to any money from the loan, ever.
- What happens if I get divorced from the borrower? You lose all status as a non-borrowing spouse. A divorce terminates any future right to a Deferral Period. You would have no right to remain in the home after the borrower’s death.
- Do my children have to pay the loan back if the balance is more than the home is worth? No. HECMs are “non-recourse” loans. Your heirs will never owe more than the home’s value at the time of sale. The FHA insurance fund covers any shortfall.
- Can my kids buy the house after I (the surviving spouse) pass away? Yes. Your heirs can choose to repay the loan and keep the home. If the loan balance is higher than the home’s value, they have the option to pay 95% of the appraised value.
- What if I was in a same-sex relationship and couldn’t legally marry when the loan was made? Yes, you can be protected. If you were in a committed relationship but legally barred from marrying, and you later married the borrower before their death, you can qualify as an Eligible Non-Borrowing Spouse.