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Oregon Could Set Precedent in Special Reverse Mortgage Case

The Oregon Department of Transportation may have set a policy precedent in solving the case of a condemned house it needed to buy in order to finish a highway project whose owner had a reverse mortgage. 

ODOT needed Patsy Burnsed’s property to complete the Brookwood Parkway/Helvetia Road Interchange Project on U.S. Highway 26, reports Oregon Live, but following the normal condemnation process in this particular instance would have left Burnsed homeless. 

That’s because Burnsed had a reverse mortgage taken out on her home, and her lender would have received the bulk, if not all, of the money ODOT would pay for the house—a situation the agency found out was a first in a condemnation case. 

ODOT began working toward a solution with Burnsed in the spring of 2012 and agreed to buy a house that would provide her “comparable living conditions” to the home she would be giving up. 

“[Burnsed] and her family didn’t like the choices ODOT offered, so they looked for alternative and found one in Hillsboro that was acceptable,” says the article. “ODOT paid about $200,000 for the house, and Burnsed signed papers Thursday that ensure that she can live in the home as long as necessary. When she no longer needs the home, ODOT will be able to sell it.”

The highway department is now working with a lender to buy Burnsed’s old home and has offered to pay $196,000, according to a spokesperson cited by Oregon Live.

While the cost of buying the old house along with the replacement home is more than the agency would typically spend in a routine condemnation case, the article notes, ODOT will likely recoup at least some of those costs through the eventual sale of Burnsed’s new home. 

The case may set a precedent for how other highway departments handle similar circumstances where a condemned home has a reverse mortgage, but ODOT has not specifically created a policy for reverse mortgages—in part, says the article, because it recognizes each case would likely be different. 

Read the full article

Written by Alyssa Gerace