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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    • Atare,

      The crisis over the law at 12 USC 1715z-20(j) is still raging for HECMs whose related application received a case number before 8/4/2014. The crisis on how to handle NBS applications with case numbers implemented after 8/3/2014 is definitely over.

      Mortgagee Letters 2014-07 and 2015-02 are quite sound since one can easily see how they follow the right of the Secretary to change policy as permitted under the Reverse Mortgage Stabilization Act of 2013 (RMSA) as codified at 12 USC 1715z-20(h)(3) and all mandates were properly prospective.

      Mortgagee Letters 2015-03 (later rescinded by Mortgagee Letter 2015-12) and 2015-15 are legally impotent. RMSA permits everything HUD mandated in the those Mortgagee Letters but nothing permits a retroactive application of the RMSA to override legal protections in force at the time HECMs closed. HUD lacks the power to legally apply RMSA retroactively.

      If pursued by NBS (or their heirs) plaintiffs where the related HECM application received a case number assignment before 8/4/2014, HUD is still liable for requiring those mortgages to provide no displacement protection for NBSs in order to be insured as HECMs. and their heirs should be able to sue for specific performance to provide that protection or sue for the loss of the home because no protection was provided. The maximum claim where the home was foreclosed upon should be the fair market rental value of the home for the period of displacement until the death of the NBS. The law also does not require that the borrower be married at closing to afford displacement protection to a subsequent spouse of the borrower.

      HUD is playing the same kind of game of risk it did before the Bennett case ever started. At least the industry knows how to new NBS applications.

  • Upon coming into the industry a decade ago, the broker informed me about the non-borrowing spouse position of HUD. After a couple of years, I finally read the law and what the law read and what HUD was doing seemed terribly different. Shortly thereafter a loan forced me to meet with a couple of HUD representatives. Over time one representative and I began talking about the HUD non-borrowing spouse rule and this person caught me by off guard in agreeing with my reasoning. After that discussion, it seemed only fair to mention to non-borrowing spouses that it seemed what HUD was mandating and what the law required were different and if something happened where they were under threat of displacement, they should check with their attorney.

    Then when the Bennett case was filed, it was surprising how many longtime originators who claimed our industry was all about helping seniors began referring to the plaintiffs as if they were freeloaders rather than non-borrowing spouses seeking what they believed to be their rights under federal law. Even if they were wrong, how were these non-borrowing spouses freeloaders?

    Now it is so obvious that non-borrowing spouses have displacement protection under federal law [12 USC 1715z-20(j)] that not only has a federal court of appeals found in favor of non-borrowing spouses but so has a Florida Court of Appeals. HUD in trying to calm the waters on HECMs with case number assignments before 8/4/2014, served up such a horrible solution in Mortgagee Letter 2015-03 that HUD had to rescind it shortly after issuance in Mortgagee Letter 2015-12. Yet since HUD did not want to accept the law, it served up a slightly improved solution in Mortgagee Letter 2015-15. Sad to say in each new and strange variation of the former HUD policy, our trade association, NRMLA, chose to support HUD.

    Due to the passage of the Reverse Mortgage Stabilization Act of 2013 as codified in 12 USC 1715z-20(h)(3) almost exactly two years ago, few disagree with the legitimacy of either Mortgagee Letter 2014-07 or Mortgagee Letter 2015-02. Yet both Mortgagee Letters 2015-03 and 2015-15 are not in compliance with the Act because they both try to change law retroactively. How worried HUD is about its position as of yet HUD has failed to appeal the Bennett case to the US Supreme Court.

    Here is how the law firm of Ballard Spahr, LLP summarizes the Florida decision in the Smith decision in regard to the federal law at 12 USC 1715z-20(j): “Finally, the Court of Appeals relied upon federal law governing reverse mortgages. The reverse mortgage was insured by the Department of Housing and Urban Development (HUD), and therefore was governed by 12 U.S.C. § 1715z-20. Under this statute, HUD may not insure a reverse mortgage unless it provides that a homeowner’s obligation to satisfy the debt is deferred until the homeowner’s death. The provision also expressly defines the term “homeowner” to include the homeowner’s spouse. Because the reverse mortgage in this case was insured by HUD, the Court of Appeals reasoned that the mortgage should be construed to be consistent with the statute that regulated and governed the mortgage. Because the statute’s explicit safeguard against the displacement of elderly homeowners would be without effect if the lender could foreclose while a homeowner’s spouse still resided in the property, the Court concluded that, to be consistent with governing federal law, the term “borrower” in the mortgage should be construed to include the surviving spouse.”

  • This can be very tricky, the state of Florida is a “Mortgage state. In the case, Smith V. Reverse Mortgage Solutions, the mortgage is a conveyance of the collateral to the lender by the owners of the property. In this case it appears by the article, both husband and wife signed the mortgage over to RMS.
    In Florida, it is usually customary that who ever is on the deed and who ever signs the mortgage (Collateral Instrument) is also on the promissory note, how this got by and unnoticed is a good question?
    I am sure in this case, the spouse was quit claimed off the deed, probably because of her age at the time the reverse mortgage was taken out but how she was mentioned in the mortgage and was allowed to sign it and convey it to the lender in that order, who knows?

    However, getting back to the Florida ruling by the Florida Court of Appeals, I foresee many problems popping up and many legal actions taken by surviving spouses that did not sign a promissory note in conjunction with a reverse mortgage because of age and being quit claimed off the deed at the time of getting the reverse mortgage, time will only tell how serious this will be?

    John A. Smaldone

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