Florida Judge Rules Reverse Mortgage Spouse has Borrower Rights

Following recent changes under the Department of Housing and Urban Development that expand rights for non-borrowing spouses of reverse mortgage borrowers, a Florida judge has ruled in a court of appeals that the definition of “borrower” includes surviving spouses. 

The ruling supersedes the HUD changes, as the case was originally filed in Florida before the HUD changes were announced. However, an analysis by law firm Ballard Spahr LLP notes that the case could have implications for others in the state of Florida, independent of the federal rule.

“This decision from the Florida Court of Appeals will forestall lenders’ foreclosure actions on reverse mortgages in Florida with respect to a surviving spouse and the Court’s reasoning may be followed in other jurisdictions,” write Alan Petlak and Sarah Reise via JD Supra Business Advisor. 

In the case, Smith V. Reverse Mortgage Solutions, Inc., the plaintiff is a surviving spouse of a reverse mortgage borrower. She was named on the original mortgage she had signed with her husband, but did not sign the promissory note relating to the reverse mortgage her husband had obtained.

Following her husband’s death, the lender commenced foreclosure proceedings based on the loan coming due following the named borrower’s death.

A trial court agreed with the lender, initially ruling in favor of RMS. 

On appeal, however, the court found the spouse to also be a “borrower” as defined both in the mortgage and under Florida and federal law. 

“With respect to the mortgage, the Court of Appeals held that, although the first paragraph of the mortgage defined the “borrower” as the husband, the final portion of the mortgage indicated that both spouses were the “borrower,” the Ballard Spahr attorneys write. “Specifically, the Court found that both spouses executed the mortgage as the “borrower” and the signatures of both spouses were jointly verified by two witnesses and a notary.”

Further, the attorneys explain, the appeals court relied upon the stat’s constitutional homestead exemption, “which provides that a security interest is only valid if signed by both the owner of property and his spouse.” 

Also citing federal law, the court determined “borrower” to include both the signed borrower and his spouse. 

The issue has been further addressed by the new federal rules since the case was filed, but the new rules were not cited in the case. 

View the commentary from Ballard Spahr. 

Written by Elizabeth Ecker

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