A divided Florida Supreme Court decision will allow foreclosure on the non-borrowing spouse of a reverse mortgage holder who did not redeem the property after the note’s maturity.
The case, WMVF v. Palmero, focused on the discrepancies between the promissory note and the mortgage document. Earlier Florida Supreme Court rulings on term mortgages dating back nearly 100 years have stated that in these cases, the note takes precedence over the mortgage. This decision extends it to the annulment of legal mortgage proceedings.
The decision sends the case back to the trial court, which is expected to approve the foreclosure petition, said William McCaughan, lead attorney for WMVF, who argued the case in the Florida Supreme Court.
The foreclosure against Luisa Palmero was first filed in 2010, and although the loan is a Federal Housing Administration home equity conversion mortgage, as the case predates federal protections for non-borrowing spouses, they do not apply, lawyers for both sides said. Only the HECMs are from after August 4, 2014 are covered by language changes in loan documents.
âWe are disappointed with the results since Ms. Palmero, who signed the [reverse] mortgage as a borrower, believed the lender could not foreclose until his death, âsaid Jeffrey Hearne of Greater Miami Legal Services, who represented her in the appeal.
The Department of Housing and Urban Development created a program in 2015 that would allow spouses not borrowing from these older loans to stay in their homes, and the lender should have taken advantage of that program, said Julie AARP Foundation Litigation Sr. Attorney Nepveu, who filed an amicus brief in the case supporting Luisa Palmero.
Roberto Palmero was the borrower of a reverse mortgage loan issued by OneWest Bank (WVMF Funding is OneWest’s successor in interest). He was listed as the only borrower on four of the five documents, with the exception of the mortgage, where Luisa Palmero is also listed as the borrower.
After the death of Roberto Palmero, the reverse mortgage became payable. When this did not happen, OneWest initiated foreclosure proceedings.
The trial court ruled that Luisa Palmero was not a co-borrower and ended the foreclosure under 2014 federal rules.
But the Florida Third Circuit rejected this approach because it was not used as an affirmative defense by his attorney at the time. Instead, a majority relied on their own earlier rulings in two cases involving Reverse Mortgage Solutions, and said the mortgage unambiguously listed Luisa Palmero as the borrower.
In a 5-2 decision, the Florida Supreme Court ruled that the approach in all three cases was flawed, overturning the Third Circuit ruling.
“It is true that Ms Palmero also took out the mortgage – as would have been necessary for the lender to have valid security because the mortgaged property was her homestead, and she did so by signing her name. in âthe borrower’s signature block,â Judge Alan Lawson wrote in the majority opinion. âHowever, unlike the Third District decision, the location of Ms. Palmero’s signature on the mortgage did not unambiguously and in law of her a co-borrower under the mortgage. “
Florida has a homestead provision that protects the property rights of an owner.
“Spouses often sign the mortgage when they are not borrowers to transfer their property,” added McCaughan.
In his dissent, Justice Jorge Labarga argues that reverse mortgages should be treated differently. âThe majority look to a precedent of nearly a hundred years that undoubtedly ignores the intricacies of reverse mortgages, nor the incentives for the parties involved,â Labarga wrote in the minority opinion.
This is the opinion that should have prevailed, argued Nepveu. The court should have relied on a 2013 federal case, Bennett v. Donovan, for advice on how the non-borrowing spouse should be treated, she said.
“It’s not that they should ignore the normal principles of term mortgages and reading all the documents together, but in doing so, they should also consider that you should interpret these contracts in accordance with the intention of the parties. “said Nepveu. .
Florida, since 2015, has the second largest share of HECM origins in the country; between 2011 and 2014, he was third behind Texas. In 2009, Florida’s share was almost equal to that of California, which has historically been the state with the most mentions. In fiscal 2020, which ended September 30, there were 41,819 FHA HECM endorsements nationwide, 8.3% of which were for properties in Florida.