For married couples considering a Home Equity Conversion Mortgage (HECM), the rules regarding non-borrowing spouses have changed dramatically since 2014. Prior to that year, surviving spouses who were not on the loan faced the risk of displacement after the borrowing spouse passed away. The landmark case Bennett v. Donovan highlighted this issue, prompting the Department of Housing and Urban Development (HUD) to issue Mortgagee Letter 2014-07.
Under the current rules, a non-borrowing spouse who meets specific eligibility criteria—such as being legally married to the borrower at the time of loan closing, residing in the home, and having their name on the title—can qualify for a deferral period. This allows them to remain in the home after the borrowing spouse dies, without having to repay the loan immediately. The deferral period lasts until the non-borrowing spouse dies, sells the home, or fails to meet occupancy requirements.
However, not all non-borrowing spouses are eligible. Those who do not meet the conditions—for example, if they are not on the title or the marriage occurred after the loan closed—may face loan acceleration and potential foreclosure. Experts advise that the safest approach is for both spouses to be listed on the title and for the non-borrowing spouse to be formally documented as eligible at closing.
State-specific protections also exist, and couples should consult with a HUD-approved counselor or attorney to understand their rights. The key takeaway: proper planning can prevent heartbreaking outcomes for surviving spouses.