Surviving Spouse Rights in Reverse Mortgage Foreclosure

When a reverse mortgage borrower dies, the property becomes due and payable — and the surviving spouse who is not a co-borrower may find themselves facing foreclosure on the home they've lived in for decades. But HUD rules, particularly HUD Mortgagee Letter 2015-03 and subsequent updates, provide significant protections for surviving spouses. Knowing these rules can mean the difference between losing the home and staying in it.

The Non-Borrowing Spouse (NBS) deferral is the key protection. Under HUD Mortgagee Letter 2015-03, an eligible non-borrowing spouse can defer repayment of the HECM loan until their own death or until they move out, sell the home, or fail to meet obligations (property taxes, insurance, HOA fees). The deferral period can last for the rest of the spouse's life — meaning the surviving spouse can remain in the home indefinitely without making mortgage payments.

Eligibility for the NBS deferral requires: the non-borrowing spouse must have been married to the borrower at the time of the HECM loan origination and must remain married until the borrower's death; they must be identified in the loan documents as an eligible non-borrowing spouse; they must occupy the property as their principal residence; and they must pay property charges (taxes, insurance, HOA) in a timely manner.

For HECMs originated before August 4, 2014 — before the NBS deferral was created — HUD has provided relief through the Mortgagee Optional Election (MOE) assignment process. Under MOE, if the loan meets certain conditions, the lender can assign it to HUD rather than foreclosing, and HUD will allow the surviving spouse to remain. Lenders are not required to elect MOE, but HUD encourages it and has guidelines for when it's appropriate.

If the surviving spouse does not qualify for NBS deferral or MOE, alternatives include: refinancing the reverse mortgage into a traditional forward mortgage (if the spouse has sufficient income and credit), selling the property and retaining any equity, negotiating a short sale with HUD approval, or in rare cases, a deed-in-lieu of foreclosure.

Surviving spouses should act quickly upon the borrower's death. Contact HUD's National Servicing Center at 877-622-8525. The lender must be notified of the borrower's death and intent to claim NBS deferral. Documentation required includes the marriage certificate, death certificate, and proof of occupancy. Missing deadlines can result in loss of protections — so don't delay.