Reverse Mortgage Foreclosure


On June 30, 2011, the Alabama Court of Civil Appeals announced its decision in Cooper v. Federal National Mortgage Association. That’s Fannie Mae.  The case concerned a foreclosure of a reverse mortgage.

Mason Cooper was the father of Edith Cooper.  On November 24, 2003, Mason took out a reverse mortgage on his home.  The mortgage ultimately came to be owned by Fannie Mae.  There was nothing in the court decision to indicate whether Edith knew about the mortgage or not.

On April 10, 2008, Mason quitclaimed his home to Edith, but continued to live there as his principal residence.  He died a month later. Afterwards, Edith lived in the home.  On January 1, 2009, Fannie Mae foreclosed on the home after declaring a default due to Mason’s death.  Reverse mortgages are repayable in full when the borrower stops living in the home as their principal residence, or when they die.

The first that Edith knew about the foreclosure was in April 2009, when Fannie filed a lawsuit to have her tossed off the property.

Edith claimed the foreclosure was defective because Fannie never gave notice to Mason’s executor, his heirs (Edith) and did not even send a notice to the property address.   The court said none of that was necessary and the foreclosure was proper. To read the entire decision, click HERE.

It’s been a LOOOONGGGG time since I had constitutional law in schoo, but I’m wondering how this is not a violation of Edith’s rights to due process of law, which requires notice before taking someone’s property.  Does anyone out there know? It seems to be that when people borrow money on a reverse mortgage, there is an extremely high likelihood they will die without anyone even knowing about the mortgage.  If someone knew, they might be able and willing to pay off the mortgage.  This way, they just lose Mom or Dad’s property, possibly their childhood home, possibly the most valuable asset in the estate, without any way to avoid it.  How can this be fair?