HECM loans generally should be settled when the last debtor dies, offers, or permanently relocates from the house. Since August 4, 2014, the HECM loan files explicitly permit for a non-borrowing spouse to stay in the home after the debtor's death, up until the non-borrowing partner either dies or vacates.

HUD developed the Mortgagee Optional Election (MOE) to enable non-borrowing partners with pre-August 2014 loans to remain in the house after the customer dies if they satisfy the eligibility requirements and continue to satisfy the terms of the loan. Under the modified guidelines issued September 2019, non-borrowing spouses no longer need to provide proof of valuable title or a legal right to remain in the house.

The new policy unwinds program deadlines and needs servicers to inform customers about the presence of the choice and demand the names of spouses who might potentially certify for the option. Borrowers will receive the notice and type with the annual tenancy certification. The reverse home mortgage loan provider is not required to offer a MOE to a non-borrowing partner.

To prevent being economically penalized, a loan provider should choose the MOE option within a sensible period, typically within 180 days of the death of the customer. This period is momentarily extended due to the pandemic. Lenders might pick the MOE alternative even after starting the foreclosure procedure. A making it through non-borrowing spouse who is offered the MOE must develop eligibility under the program's standards.

If the borrower was enrolled in a plan to pay back residential or commercial property charge financial obligations, the non-borrowing partner should bring the delinquency as much as date before the lending institution designates the loan to HUD. If the non-borrowing spouse certifies for the MOE, the due and payable status on the loan will be delayed and the loan will not undergo foreclosure till the spouse moves out of the house, passes away, or stops working to satisfy the conditions of the loan.

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