Her Husband Is Taking Out the Reverse Mortgage in His Name Alone. When He Dies, a 2014 HUD Rule Will Let Her Keep Living There, and the Lender Will Have to Wait
A little-known 2014 HUD rule quietly shifted the power balance between surviving spouses and reverse mortgage lenders, but most couples only discover it exists after the borrower has already died.
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For those unfamiliar, the crux of a 2014 HUD rule is that it provides protection, especially in cases like a scenario where a younger wife stays in the house after her husband dies if he took out a reverse mortgage in his name alone. Under that rule, the lender must defer collection as long as she meets its terms, but many couples don’t learn about HUD Mortgagee Letter 2014-07 until after the borrower dies.
Why Widows Were Losing Homes Before 2014
A Home Equity Conversion Mortgage (HECM) is the FHA-insured reverse mortgage most retirees get, and it used to come due in full when the last borrower died. A spouse left off the loan had to repay it or face foreclosure. Many couples left the younger spouse off on purpose because it raised the initial payout, according to Bradley Arant Boult Cummings.
On September 30, 2013, a federal court ruled in Bennett v. Donovan that the HECM statute, 12 U.S.C. § 1715z-20(j), allowed HUD to insure only loans that came due after both the homeowner and spouse had died. HUD published Mortgagee Letter 2014-07 on April 25, 2014.
How the Deferral Keeps the Lender Waiting
The rule covers HECMs whose FHA case numbers were assigned on or after August 4, 2014. If an eligible non-borrowing spouse lives in the home when the borrower dies, the loan’s due-and-payable status is deferred. The balance stays attached to the house, and repayment waits until she dies, moves out, or no longer meets the requirements.
The rule now lives in federal regulation at 24 CFR 206.55. Mortgagee Letter 2021-11 extended it, and lenders had to comply by September 3, 2021. It also covers additional cases, such as when the borrower may live in a health care facility for more than 12 consecutive months, and the rule dropped the requirement that the spouse prove she holds marketable title.
Who Qualifies for the Protection and Who Misses Out
The borrowing spouse must be at least 62. A younger spouse can be a non-borrowing spouse. To qualify, she must meet several conditions. She must be named in the loan documents, be married to the borrower at closing, live in the home as her principal residence, and keep paying property taxes and insurance (HUD Mortgagee Letter 2014-07). Common-law spouses also count, and when a spouse the borrower marries after closing does not qualify, according to HUD Housing Notice H 2014-17. Private reverse mortgages may handle spouses differently, so the protection applies only to HECMs.
Loans with case numbers from before August 4, 2014 fall under Mortgagee Letter 2021-11. For those loans, the servicer may choose to hand the loan to HUD through a Mortgagee Optional Election assignment, and that choice belongs to the lender.
Steps to Secure the Deferral Before Closing
- Confirm the loan is an FHA-insured HECM and get the FHA case number in writing.
- Attend required HUD-approved counseling together. Counselors must explain every deferral requirement to the non-borrowing spouse.
- Before signing, confirm she is named in the loan documents as an eligible non-borrowing spouse and has signed required forms.
- Set money aside for property taxes, homeowners insurance, and maintenance after the borrower’s death.
- Keep copies of the marriage certificate and closing papers. She will need them when she contacts the servicer after the borrower dies.
Costs and Traps That Can Void the Deferral
Naming her comes at a cost. For loans after August 4, 2014, HUD insures the HECM using the youngest spouse’s age, whether or not that spouse is a borrower. A younger age means a smaller loan. During the deferral, she cannot take any further draws. Any unused line of credit or monthly payment stops when the borrower dies, though interest keeps building on the balance.
HUD enforces requirements strictly. Missing any at closing or afterward makes the loan due and payable, and the deferral is gone, according to HUD Housing Notice H 2014-17. If she falls behind on taxes or insurance, HUD’s home retention options are not available to non-borrowing spouses (HUD Handbook 7610.1).
Home values affect how often couples face this choice. The S&P CoreLogic Case-Shiller National Home Price Index was 337.3 in July 2026, its highest reading in the past year. Higher home equity can make HECMs more appealing to retirees, and couples must decide whether to name the younger spouse at closing. They cannot add the deferral later.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
