Reverse mortgages can be a great financial tool for retirees or others living on a fixed income. A reverse mortgage can be used to pay off an existing home loan, gain freedom from a house payment and/or provide a retirement income source. The homeowner must still pay real estate taxes and homeowner’s insurance but otherwise no payments are due on a reverse mortgage until the borrower spouses both die. Then the loan comes all due and must be paid in full by refinancing, the use of other estate assets or by a sale of the home.
But what happens when the reverse mortgage is taken out by only one spouse? If the surviving spouse is not also a borrower, he or she may need to sell or refinance the house when the borrower spouse dies. Refinancing is not usually an option for a surviving spouse so the family home would need to be sold at, perhaps, the worst possible time. At least that was the situation until the advent of an FHA program called Mortgagee Optional Election (MOE).
The MOE program can enable a surviving spouse who was not a reverse mortgage borrower to remain in the family home after the borrowing spouse dies. But inclusion in this program is not automatic. The surviving spouse needs to contact the mortgage servicer to request an MOE assignment. Certain conditions also apply: