Florida Appeals Court Changes Foreclosure of Reverse Mortgage by Changing “Borrower” to Include Living Spouse

Written by Allison Slusher

Reverse mortgages are gaining increased popularity for loans in Florida. To foreclose reverse mortgages, lenders should prove that all conditions needed to move the loan forward have happened. A usual happening is that the borrower is previously passed, and the home isn’t the main home of the surviving partner. More recently,the Court of appeals changed the meaning of a “borrower” to also mean a spouse who didn’t sign.

In the case of “Smith v. Reverse Mortgage Solutions, Inc.”, Mr. Smith had a note that created a “reverse mortgage”. His wife didn’t sign the note, however she did sign the mortgage. When Mr. Smith passed away, the lender began foreclosure action, and stated that the necessary conditions to lead to foreclosure were met. Mainly, the lender stated that Mr. Smith was the sole borrower, so, when he passed away, the home wasn’t the home of the borrower. The Court agreed, and stayed in favor of the lender.

When appealed, the Florida Court deemed that Mr. Smith’s wife would also be considered a  “borrower” as defined in the mortgage, and also in law. The Court of Appeals maintained that, even though the mortgage showed Mr. Smith as the borrower, the mortgage also showed that both were borrowers. 

The Appeals Court also called to Florida’s “constitutional homestead exemption”, which ensures that an interest is acknowledged only if it was signed by a property owner and their s/o. The Appeals Court maintained that in the “homestead exemption”, the security is only recognized if both are considered “borrowers.”

The mortgage was insured by the “Department of Housing and Urban Development”, and was “governed by 12 U.S.C. § 1715z-20”. Under this law, Department of Housing and Urban Development are not required to insure reverse mortgages if it doesn’t provide that a homeowner’s necessity to fulfill the debt owed is put off until after the owner’s death. The exception also gives meaning to “homeowner” making it also include the owner’s spouse. Because the mortgage was insured by Department of Housing and Urban Development, the Appeals Court stated that the mortgage should be consistent with the law that regulated the mortgage. Because the law’s security against the displacing elderly owners would not effect if the lender forecloses while the owners spouse still lives on said property, the Appeals Court stated that the definition of “borrower” in relation to the mortgage will be  changed to also extend to a surviving partner.