Florida Supreme Court Rules for Lender in NBS Reverse Mortgage Case



The Florida Supreme Court overturned a first-instance decision that was upheld by the Third Circuit Court of Appeals in a reverse mortgage loan case that was expedited and canceled by the lender. According to the judgment in the case, the trial court and the Third Circuit erred in preventing foreclosure on a reverse mortgage loan for which the principal borrower had passed away but the borrower’s spouse was still eager to stay in the home. This is according to court documents obtained by RMD.

Ultimately, the Florida Supreme Court ruled in favor of the creditor and his successor. The original lender was OneWest Bank, which was replaced by WVMF Funding. The dispute arises over a reverse mortgage, in which the primary borrower applied without including his spouse on the reverse mortgage, which complicates the foreclosure process after his death.

Ultimately, the Supreme Court’s decision seems to boil down to the fact that the lower courts do not comply with the way in which conditions related to a loan are determined based on the legal precedent mentioned in the majority opinion.

A business

Roberto Palmero and his wife Louise initially applied for a reverse mortgage loan in August 2006 as co-borrowers, but withdrew and reapplied in December of that year, with Mr. Palmero listed as the only borrower. Of the five documents signed by Mr. Palmero to disburse the loan, one was an adjustable interest rate bill of exchange which the court considers to be of “paramount importance” as it defines the term “borrower” as “each person signing at the end of this note.” … …

In this particular form – even with a certificate of ownership by the non-borrower spouse – Mr. Palmero’s name is the only one signed on the note itself. The certificate also lists the husband as the only borrower, according to the court’s conclusion based on a review of the relevant documents.

Mr. and Mrs. Palmero signed the actual mortgage reverse mortgage agreement, the date of which coincides with the date of the promissory note, and which also states that Mr. Palmero is the sole borrower of the mortgage. The regular payments on the loan were made by the lender until Mr. Palmero’s death in 2008, after which the loan was accelerated to payable status. When the loan was not repaid, the then lender – OneWest Bank – tried to foreclose, but Ms Palmero and her grown children stated in court that she was a co-borrower and not subject to foreclosure while she was still living in the house as hers. main place of residence.

“After the trial, the trial court ruled that Ms. Palmero was not a co-borrower,” the court said in its conclusion. “However, he refused to foreclose on the basis of federal law regulating the possibility of insurance of reverse mortgages by the secretary of the Department of Housing and Urban Development.”

This decision was upheld by the Third Circuit Court of Appeals and went even further, stating that the trial court erred in stating that Ms Palmero was not a co-borrower. The Third District also prevented foreclosure from continuing. Now, having reached the Florida Supreme Court, the body has ruled that Ms. Palmero is not actually a co-borrower due to the importance of the note in identifying borrowers by agreement.

“The Board of the Third Circuit ignores not only that the mortgage directly identifies Mr. Palmero as the ‘Borrower’, but also ignores the fact that foreclosure precedent requires courts to read the mortgage along with the note it provides,” in the solution.

However, the Court also notes that the indication that Palmeros might have had at the time of grant was that more loan could have been obtained if Ms Palmero’s name had not been mentioned in the loan.

“However, we note that all other documents consistently show that the parties intended to make Mr. Palmero the sole Borrower, and the record shows that Mr. Palmero“ was entitled to – and received – a higher amount than would paid if Ms Palmero was a co-borrower, ”the conclusion says, citing documentation from the previous court.

Disagreement, the difference between forward and backward

A Florida Supreme Court judge wrote a dissenting opinion that Mr. Palmero is the only borrower in the case “legally” according to Judge Jorge Labargue, joined by Justice Ricky Polston.

“Although I agree that under both [cited precedents] the banknote prevails in the context of a conventional mortgage, there is no authority requiring the same result in the context of a reverse mortgage, ”wrote Judge Labargue. “Relying on [the cited precedents]The majority relies on a precedent almost a century ago, which undoubtedly does not account for the complexities of reverse mortgages or the incentives for the parties involved. Moreover, since [the cited precedents] are not reverse mortgage cases, they are not related to the same problems of federal law [the law]… “

The precedents above refer to the cases of 1907 and 1934, respectively, decades before recording the first American reverse mortgages took place in 1961. The Modern Home Mortgage Lending Program (HECM) was initiated by the signing of the Housing and Community Development Act of 1987, which entered into force in February 1988 after being signed into law by President Ronald. Reagan.

This was a major component of Palmeros’ argument in their case against the organization that succeeded at OneWest Bank. The final judgment of the Court disagreed with this assertion due to the importance of the banknote equally prevailing in traditional forward and reverse mortgage transactions.

NBS problems

This case highlights some of the current problems with reverse mortgages that arose prior to the introduction of stricter protections for non-borrower spouses (NBCs) in 2014. Additional rules governing the protection of eligible NBGs continue to persist in the area of ​​reverse mortgages, with the most recent such rules being handed over by the Joe Biden administration in Mortgagee Letter (ML) 2021-11.

This guide introduces four major new protections for eligible NBSs in a reverse mortgage transaction, including expanding the criteria to start the grace period for HECM loans with case numbers assigned on or after Aug. 4, 2014, including a scenario in which the primary borrower has been living in the health facility for more than 12 consecutive months, but NBS stays at home.

It also presented expanded criteria for appointment as well as expanded definitions of who is considered eligible for NBS. The National Reverse Mortgage Lenders Association (NRMLA) recently requested leadership from HUD asking for additional clarity on the new NBS regulations.


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