October 11, 2018
Authored by: Anne Redcross Beehler
The Eleventh Circuit recently rejected a defense to foreclosure based on a federal statute governing insurance of reverse mortgages by the Department of Housing and Urban Development (“HUD”).
HUD administers a mortgage-insurance program designed to induce lenders to offer reverse mortgage loans to elderly homeowners. If the loan meets certain conditions, HUD insures against any outstanding balance owed on the loan. One condition, contained in 12 U.S.C. § 1715z-20(j), provides:
The Secretary may not insure a home equity conversion mortgage under this section unless such mortgage provides that the homeowner’s obligation to satisfy the loan obligation is deferred until the homeowner’s death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary. For purposes of this subsection, the term “homeowner” includes the spouse of a homeowner.
Borrowers and their estates have argued the statute prevents lenders from seeking repayment of a loan subject to a reverse mortgage until either the sale of the home, or the death of both the borrower and his or her non-borrowing spouse – even if the loan documents provide to the contrary. The Court in Estate of Caldwell Jones, Jr. v. Live Well Financial, Inc., No. 1:17-cv-03105-TWT (decided Sept. 5, 2018) rejected this argument.
In Estate of Caldwell Jones, Jr., former NBA star, Caldwell Jones, Jr., obtained a reverse mortgage secured by his home. Jones lived in the home with his wife and his minor daughter, until he passed away in 2014. Jones’s wife was not a co-borrower.