Florida Supreme Court recently held that the surviving spouse of a reverse mortgage borrower who remained in their home as their primary residence after the borrower’s death is not a borrower and overturned the Third District Court of Appeals decision that allowed the mortgage foreclosure.
The borrower first applied for a reverse mortgage loan with the spouse as a fellow borrower, but then withdrew the application and applied for the same FHA insured loan as the sole borrower. The spouse did not sign the promissory note or loan agreement defining the principal borrower as the sole borrower, but the spouse signed the mortgage along with the borrower’s children above the signature lines that had their names and pre-printed signatures on the word “borrower” . Documents issued upon completion included a non-borrower spouse certification under which the spouse confirmed that they are not a borrower under the loan.
The main borrower died, causing the debt to accelerate. The estate did not repay the loan, and the lender attempted foreclosure. The surviving spouse defended himself against foreclosure, arguing that she was a co-debtor of the mortgage. Language in mortgage enforcement on the following: “A borrower dies and the property is not the primary residence of at least one surviving borrower.” which regulates the insurability of reverse mortgages through HUD. In the appeal proceedings, the Third District found at a dress rehearsal that the court had made a mistake by invoking the federal law refusing foreclosure, but disagreed with the court of first instance’s finding that the spouse was not a contributor and ruled that ” as a legal matter ”the mortgage defined her as a“ borrower ”.
The Florida Supreme Court overturned the Third District ruling, finding that the court failed to properly apply the nearly century-old precedent. It noted that the general rule in foreclosure proceedings is that a mortgage should be laid out along with the secured bond. According to the case law of the court, if there is a conflict between the terms of the bond and the mortgage, the bond shall prevail. Since the bond expressly defined the principal debtor as the sole “borrower”, the court found that his death met the bond conditions and the lender had foreclosure.
One judge’s dissenting opinion found that the court’s precedent only applied to traditional mortgages, not the intricacies of reverse mortgages. It argued that conventional mortgages can be distinguished from reverse mortgages so that the court does not have to rely as heavily on traditional mortgage precedents.