Reverse Mortgage Foreclosures -FAQs

What is a reverse mortgage?

A reverse mortgage is a type of loan where the lender gives money to an older person, usually a homeowner, to use as income. The money is secured by a mortgage on the person’s home. This way, the person can access their home equity without worrying about losing their house. The loan has to be repaid when the person sells the house or no longer lives there as their main home. If the person dies, the loan also has to be repaid. Unlike regular mortgages, the person doesn’t have to pay back the loan until certain things happen. A reverse mortgage is a type of loan that’s not a debt. It’s secured by the person’s home. The person doesn’t have to make any payments. There’s no personal responsibility for the loan. The only way to get the money back is to sell the house. So, there’s no one who’s legally responsible for the loan. Reverse mortgages are usually made through the Home Equity Conversion Mortgage (HECM) program run by the U.S. Department of Housing and Urban Development (HUD). The government-backed reverse mortgage is called a Home Equity Conversion Mortgage (HECM) and can only be obtained through an FHA-approved lender.

When can a Reverse Mortgage be Foreclosed?

The plaintiff seeking to foreclose on a reverse mortgage must demonstrate (1) that the defendant owned the subject property; (2) the total amount owed under the note and mortgage, including interest; and (3) that all the prerequisites for accelerating the note and foreclosing on the mortgage have been met. These prerequisites typically include an event that makes the loan due and payable, such as the borrower’s death or their failure to occupy the home as the primary residence. These triggering events are legally considered defaults under the terms of the reverse mortgage agreement. A mortgage assignee complies with the conditions necessary for foreclosure on a reverse mortgage by delivering or mailing notice to the borrower that repayment of the note is required after the mortgagor’s death.

What happens when a spouse dies?

When a spouse of a reverse mortgagor is a co-borrower, a prerequisite for the mortgagee’s right to foreclose on the mortgage is that the spouse either passes away or stops using the subject property as their primary residence. Even if a spouse is not mentioned in the note and their signature is absent, they may still be considered a borrower on a reverse mortgage under a state constitution’s homestead provision and federal statutes related to reverse mortgages, which were enacted to safeguard the rights of elderly homeowners. Consequently, in such cases, the mortgagee cannot foreclose on the mortgage after the other spouse’s death, even if an acceleration clause is included in the note.

Under a federal regulation, 24 C.F.R. § 206.55, governing mortgage loan insurance for reverse mortgages (home equity conversion mortgages), the mortgage will not be deemed due and payable with respect to an eligible nonborrowing spouse if the last surviving borrower predeceases that nonborrowing spouse. So, just because the borrowing spouse dies does not mean that the surviving spouse will be forced out of the home. The nonborrowing spouse must meet certain requirements, however,

to achieve and maintain this deferred status. Specifically, under 24 C.F.R. § 206.55(d), the eligible nonborrowing spouse must satisfy (and continue to satisfy) the following requirements:

(1) Within 90 days from the death of the last surviving reverse mortgage borrower, establish legal ownership or other ongoing legal right to remain for life in the property securing the mortgage;

(2) After the death of the last surviving borrower, ensure that all other obligations of the reverse mortgage borrower(s) contained in the loan documents continue to be satisfied; and

(3) After the death of the last surviving borrower, ensure that the HECM does not become eligible to be called due and payable for any other reason.

Florida Reverse Mortgage Foreclosure Defense Lawyer

In a case seeking foreclosure on a reverse mortgage, issues and defenses not raised in the trial court by the Defendants will usually be deemed forfeited. If you’re facing foreclosure on a reverse mortgage, contact Florida reverse mortgage foreclosure defense attorney Andrew J. Pascale today at 877-667-1211 to discuss your case. Please note that this blog does not provide legal advice and is intended for illustrative purposes only.