A decision handed down by a Florida appeals court bodes well for reverse mortgage lenders. At issue are the rights of non-borrowing surviving spouses.
Roberto Palmero obtained a reverse mortgage in December 2006 from Value Financial Mortgage Services Inc. OneWest Bank, FSB, eventually became the holder of the note.
Palmero’s wife,
Luisa Palmero, didn’t sign the note. She did, however, sign a required certification as a non-borrowing spouse.
“In Mrs. Palmero’s portion, she certified that ‘should [her] spouse predecease [her] … and unless another means of repayment [was] obtained, the home where [she] reside[s] may need to be sold to repay reverse mortgage debt incurred by [her] spouse,” the April 18 decision from Florida’s Third District Court of Appeal stated. “If the home where [she] reside[s] [was] required to be resold,’ Mrs. Palmero agreed she understood ‘that [she] may be required to move from [her] residence,”
Robert Palmero received draws from May 2007 until July 2008. He died the following month.
Subsequent to his death, in November 2008, the lender accelerated the loan
and foreclosed after no payment was received from his widow.
But the trial court refused to grant the foreclosure and
entered judgment for Luisa Palmero because of a federal reverse mortgage statute that said, “the repayment of a reverse mortgage loan is deferred until the death of both the borrowing homeowner and the homeowner’s spouse.”
So OneWest appealed.
The appeals court found that the defendant had waived her rights under the statute because she didn’t properly plead lack of standing and fraud.
“We conclude that the trial court erred in granting judgment for Mrs. Palmero,” the decision stated. “We reverse the judgment for Mrs. Palmero and remand for the trial court to enter judgment in favor of the bank.”
In a written statement, James W. Wright Jr. and R. Aaron Chastain of Bradley Arant Boult Cummings called the decision a significant victory for reverse mortgage lenders.
“Palmero demonstrates that a lender may demonstrate that the surviving spouse is not a ‘borrower’ under the mortgage by introducing the other documents executed at the time the loan is originated — most significantly, the non-borrower spouse ownership interest certification, in which the non-borrowing spouse expressly recognized the fact that the borrower’s death would allow the lender to accelerate the loan and proceed to foreclosure,” Wright stated.
