Tag Archives: home loan

Risky Reverse Mortgages

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The Consumer Financial Protection Bureau released a report, Snapshot of Reverse Mortgage Complaints:  December 2011-December 2014. By way of background,

Reverse mortgages differ from other types of home loans in a few important ways. First, unlike traditional “forward” mortgages, reverse mortgages do not require borrower(s) to make monthly mortgage payments (though they must continue paying property taxes and homeowners’ insurance). Prospective reverse mortgage borrowers are required to undergo mandatory housing counseling before they sign for the loan. The loan proceeds are generally provided to the borrowers as lump-sum payouts, annuity-like monthly payments, or as lines of credit. The interest and fees on the mortgage are added to the loan balance each month. The total loan balance becomes due upon the death of the borrower(s), the sale of the home, or if the borrower(s) permanently move from the home. In addition, a payment deferral period may be available to some non-borrowing spouses following the borrowing spouse’s death. (3, footnotes omitted)

The CFPB concludes that

borrowers and their non-borrowing spouses who obtained reverse mortgages prior to August 4, 2014 may likely encounter difficulties in upcoming years similar to those described in this Snapshot, i.e., non-borrowing spouses seeking to retain ownership of their homes after the borrowing spouse dies. As a result, many of these consumers may need notification of and assistance in averting impending possible displacement should the non-borrowing spouse outlive his or her borrowing spouse.

For millions of older Americans, especially those without sufficient retirement reserves, tapping into accrued home equity could help them achieve economic security in later life. As the likelihood increases that older Americans will use their home equity to supplement their retirement income, it is essential that the terms, conditions and servicing of reverse mortgages be fair and transparent so that consumers can make informed decisions regarding their options. (16)
Reverse mortgages have a number of characteristics that would make them ripe for abuse: borrowers are elderly; borrowers have a hard time refinancing them; borrowers can negatively affect their spouses by entering into to them. Seems like a no brainer for the CFPB to pay close attention to this useful but risky product.

Alabama Court Reverses Lower Court’s Decision Granting Summary Judgment to Foreclosing Entity

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The court in deciding Sturdivant v. BAC Home Loan Servicing, LP, 2013 Ala. Civ. App. (Ala. Civ. App., 2013) reversed the lower court’s ruling that granted summary judgment to a foreclosing entity with respect to its complaint in ejectment against a mortgagor under Ala. Code § 6-6-280(b).

The court’s decision was based on the fact that the foreclosing entity presented no evidence that it was either the assignee of the mortgage or the holder of the note at the time it foreclosed, it failed to present a prima facie case that it had the authority to foreclose and, thus, had valid title to or the right to possess the property–one of the elements of its claim in ejectment.

Illinois Court Rejects Plaintiff’s Claims of FDCPA, Fourteenth Amendment, Mortgage Foreclosure Law, and Assignment Violations

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The court in deciding Gonzalez v. Bank of Am., N.A., 2014 U.S. Dist, 67 (N.D. Ill. 2014) granted defendant’s motion to dismiss.

Plaintiff (Gonzalez) filed a four-count complaint against Bank of America and MERS seeking damages arising from alleged violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq. (Count I); void assignment of mortgage in violation of the Fourteenth Amendment (Count II); lack of authority to assign mortgage (Count III); and, against Bank of America only, violation of the Illinois Mortgage Foreclosure Law (Count IV).

Defendants moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Ultimately the court granted defendant’s motion.