Federal Court Ruling: Banks Cannot Foreclose Just Because Surviving Spouse Is Not Named on Reverse Mortgage
In what has been lauded as a groundbreaking ruling, a United States District Court for the District of Columbia recently said that a bank cannot foreclose on a reverse mortgage just because the surviving spouse was not named on the mortgage documents. Bennett v. Donovan, 2013 WL 5442154 (D.D. C. Sept. 30, 2013).
This is a reversal of standard practices. Previously, the Department of Housing and Urban Development (HUD) issued form reverse mortgage documents that gave lenders the right to accelerate the loan (meaning the entire amount became due) upon the death of the spouse who was the solely named borrower on the documents. This meant that if one spouse was not named as a borrower, that spouse had to come up with the entire mortgage amount or else face foreclosure.
Unfortunately, because of predatory lenders and misinformation, many couples got reverse mortgages in the name of one spouse only (typically the older spouse).
To learn more about this case, including the factual background and the reasoning behind the decision, see Nolo's article New Rule: Spouses Not Named on Reverse Mortgages Are Protected From Foreclosure.