Florida Court Rules in Favor of Bank in Non-Borrowing Spouse Case

A Florida appeals court ruled in favor of a reverse mortgage lender in a foreclosure case, signaling an industry victory in the state over the often tricky issue of non-borrowing spouses.

The case involved Roberto and Luisa Palmero, a Florida couple that took out a reverse mortgage with Value Financial Mortgage Services in December 2006. At the time, only Roberto Palmero signed the Home Equity Conversion Mortgage paperwork as the borrower, and not his wife. When he died two years later, the lender moved to foreclose on the property, but Luisa Palmero argued that she could remain in the home as a non-borrowing spouse.

A trial court found in favor of Palmero, but lender OneWest Bank — which had taken on the loan from Value Financial — won a reversal on appeal last week.


Florida’s Third District Court of Appeal repeatedly notes that only Roberto Palmero was listed on the loan as the borrower, having signed the note, the loan application, and the loan agreement on his own. The Palmeros also jointly signed a non-borrowing spouse ownership interest certification, in which Luisa Palmero acknowledged that she may be required to leave the property if her husband died before her and the sale of the home was required to pay the debt.

While the original trial court ruled that Luisa Palmero was not a borrower, it also found that federal law regarding HECM foreclosures — specifically the passage that states, “the repayment of a reverse mortgage loan is deferred until the death of both the borrowing homeowner and the homeowner’s spouse” — overrode the fact that she was not formally listed as a borrower.

In finding for OneWest, the court focused on the fact that Luisa Palmero was not listed as a borrower on multiple pieces of paperwork involved in the origination of the loan.

“To the extent there was any confusion or inconsistency in the mortgage, it was cleared up by the note, loan application, loan agreement, and non-borrower spouse certification, which unequivocally provided that Mrs. Palmero was not the borrower for the reverse mortgage and defined Mr. Palmero as the borrower,” the court wrote in the decision, officially known as OneWest Bank, FSB v. Palmero.

The judges also determined that because neither Luisa Palmero nor OneWest cited federal law in the original case, a court could not determine that the statute overrode the contract; in other words, she lost the right to benefit from that point because she did not bring it up during the original trial.

The decision was a “significant victory” for the reverse mortgage lending industry in the Sunshine State, lawyers James W. Wright, Jr. and R. Aaron Chastain wrote in an analysis for the firm of Bradley Arant Boult Cummings — which initially reported on the case.

Palmero demonstrates that a lender may demonstrate that the surviving spouse is not a ‘borrower’ under the mortgage by introducing the other documents at the time the loan is originated,” Wright and Chastain wrote.

Written by Alex Spanko

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  • I can’t believe what I just read? First off, if all the proper non-borrowing docs were signed in accordance to HUD guidelines on the “Non-Borrowing Spouse” ruling, this can’t be upheld, in my opinion that is!

    Also, I never heard or have seen in the standard docs pertaining to non-borrowing spouses that the “Non-borrowing spouse may be required to leave the property if her husband died before her and that the home would have to be sold to pay off the UPB”! I am saying this if all the proper non-borrowing docs were executed properly!

    I can understand if a non-borrowing spouse after being in the home for a while after the death of her husband did not pay the taxes and insurance. That could eventually lead to foreclosure but what was done in Florida on the surface anyway, is absurd!

    Unless we are missing facts and do not know the whole story, this could be devastating to the non-borrowing spouse ruling as a whole!

    I also agree with what Nelson Locke said in his comment, very good point Nelson!

    John A. Smaldone

  • While I, too, am surprised by the court’s decision, I think it is presumptuous for anyone to say it is “wrong” without having reviewed the documents and heard the testimony on which the decision was based. Come on, people.

  • Susan,

    Why are jury trials needed? I am not against them but was one even available? If not, that appears to be a matter of state law. I do not believe NRMLA nor lenders wish to invest in changes jury option rules in 50 states.

    How was the surviving spouse mistreated?

    There is absolutely nothing wrong with the lender choosing foreclosure. Mortgagee Letter 2015-15 allows lenders to do just that. In substance it is much different than Mortgagee 2015-02 where lenders cannot foreclose if the non-borrowing surviving spouse substantiates that he/she meets the requirements to be eligible to defer payment of the unpaid balance due.

    As to which Mortgagee Letter applies, if the case number was assigned before August 4, 2014 then Mortgagee Letter 2015-15 applies. If the case number was assigned after August 3, 2014, then Mortgagee Letter 2015-02 applies.

    Mr. Nelson Locke makes an important point as to whether Mortgagee Letter 2015-15 should be invalidated. I generally concur with the view Mr. Locke expresses.

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