Felicia El Hassan had already lost one house.
During turbulent times decades earlier in communist Cuba, she’d been forced to surrender property before fleeing to America.
The 86-year-old woman thought those days were far behind her after living quietly for nearly 20 years in a modest house in Opa-locka, a working-class neighborhood in northern Miami-Dade.
But that peace of mind ended when a process server appeared on her doorstep with court papers informing her of a foreclosure lawsuit by Liberty Home Equity Solutions Inc., formerly Genworth Financial Home Equity Access Inc. The complaint’s sole basis was the lender’s claim that El Hassan violated a key covenant of reverse mortgages by moving out, thereby defaulting on the loan.
“The allegation is basically debunked,” El Hassan’s lawyer, Ricky Corona, said. “Not only was she living there, but … they served it at her house.”
This, defense attorneys say, is a new strategy by lenders and plaintiffs lawyers: sue to foreclose on government-guaranteed home loans under various defaults, then fast-track these suits by filing motions for orders to show cause. These motions shift the burden of proof to the borrower, requiring them to appear in court and explain why a judge shouldn’t grant final judgment against them.
“All of a sudden, we saw a spate of foreclosures where the mortgage companies alleged the seniors no longer lived in the home,” said Gladys Gerson, supervising attorney for Coast to Coast Legal Aid of South Florida’s senior unit. “This has been happening around the state.”
About a dozen similar cases reached Gerson and other attorneys at Coast to Coast, who have helped a growing number of low-income seniors fight and win dismissals despite aggressive lender litigation.
Florida is ground zero for seniors’ issues, but as the strategy has often proved effective, it’s likely to spread, according to defense attorneys. “If you see the volume of national advertising that’s geared to seniors, I can’t believe this is limited to Florida,” Corona’s father and partner, Ricardo, said. “The servicers are not even based in Florida, so I don’t see why they would limit themselves.”
Corona admits he didn’t expect a hard fight when he first reviewed El Hassan’s case, but court records show he was wrong. Over the last 10 months, the ongoing litigation yielded two hearings, 40 docket entries and attempts by both sides to collect attorney fees.
When he first met El Hassan, Corona expected the plaintiff would realize the error and dismiss the suit. Without charging her or entering a notice of appearance, he placed a phone call to plaintiffs lawyers at Robertson Anschutz & Schneid in Boca Raton to say El Hassan had never moved out of her home.
Robertson Anschutz & Schneid did not respond to requests for comment, but court records show they ratcheted up the litigation with a motion for an order to show cause weeks after Corona’s phone call.
“I looked at the document. I couldn’t believe it,” Corona said. “I was in shock (at) what the bank was trying to do.”
Too Good To Be True?
Reverse mortgages are federally insured loans that allow qualified homeowners age 62 and older to borrow against the equity in their property. Instead of making payments to lenders, homeowners receive loan proceeds. The loans grew in popularity as aging Baby Boomers looked to supplement retirement income and greying populations on fixed incomes sought additional funds to pay debts, do home repairs and maintain their standard of living.
“One of the concerns has always been people taking advantage of them,”Ricardo Corona- said in a video interview. “What we’ve seen unfortunately is … now institutionally, it seems like they’re being taken advantage of.”
The loans deplete homeowners’ equity and accumulate interest, but don’t become due until borrowers move out, die, sell the property or fail to pay property taxes and insurance. They attract investors drawn to the government guarantee, and proponents laud them as a means for seniors to supplement retirement income. But they also raise red flags among consumer advocates like the AARP, who say the products are expensive, high risk and likely to end in technical defaults for at least 10 percent of borrowers who can’t maintain the expense.
“The concept in my opinion was good—to preserve the senior in his home until he could no longer be in his home,” Gerson said. “But as with all things there were cracks in the system. Some seniors fell through those cracks and got foreclosed on.”
Watchdogs like the federal Consumer Financial Protection Bureau point to deceptive advertising that “seduce” cash-strapped seniors without disclosing the possibility of losing their home. A June 2015 CFPB report uncovered widespread misconceptions among borrowers who incorrectly believed they were receiving a government benefit, instead of a loan from a private lender who expected full repayment.
“As older consumers consider reverse mortgage loans to tap into their home equity, they need to be careful of those late-night TV ads that seem too good to be true,” agency director Richard Cordray said in a statement issued at that time. “It is important that advertisements do not downplay the terms and risks of reverse mortgages or confuse prospective borrowers.”
In December, the bureau took action against three reverse mortgage companies for deceptive advertisements that falsely claimed borrowers could not lose their homes through the loan program.
Among those penalized was Houston-based Reverse Mortgage Solutions Inc., which paid a $325,000 civil penalty under a consent order.
“The company also created a false sense of urgency to buy the reverse mortgage product,” according to the CFPB. “For example, one call script required representatives to tell potential customers that if they didn’t call back by close of business, they would … ‘miss out on a tremendous money-saving opportunity.’ In fact, it was not a limited-time offer.” It also “misrepresented that a reverse mortgage could ‘eliminate debt,’” when in reality the product created a large debt.
A loan serviced by Reverse Mortgage Solutions Inc. would come back to haunt El Hassan.
These flawed representations permeate an industry where real estate debt routinely changes hands through systems and processes that create a myriad of challenges in foreclosure cases. When reverse mortgages trade, elderly borrowers sometimes fail to realize the change. As new lenders mail postcards and letters requiring seniors to return the documents and certify occupancy, clients struggling with cognitive difficulties are especially vulnerable to technical defaults.
In El Hassan’s case, the loan originated with Liberty Home and sold to the Federal National Mortgage Association, but continued with a single servicer, Reverse Mortgage Solutions, which uses meticulous administrative processes and adhere to Department of Housing and Urban Development servicing guidelines for annual borrower certification, according to spokesman Rick Gillespie.
“Reverse Mortgage Solutions has established a detailed process to verify occupancy,” Gillespie said in a statement.
The company’s seven-step process includes two certification letters over 30 days, then an in-person inspection if those fail.
“The inspector is required to attempt to make contact with the borrower at least three times and must include one evening and one weekend,” according to the statement.
Meanwhile, staff attempt to reach borrowers by phone, and search the obituaries to see if clients have died. After three letters, two inspections, phone calls and other attempts over about four months, the company submits paperwork seeking approval from the housing department to call the loans due. It immediately halts legal action if borrowers send signed occupancy certificates, Gillespie said.
But defense counsel, like Katianna Mazard in Plantation, say otherwise, contending that lenders continue to press claims of default despite evidence to the contrary.
“Even with documentation, they fight,” Mazard said. “The send seniors certificates of occupancy … but rely on them not to send the forms back.”
‘They Started Saying We Didn’t Live here’
Deerfield Beach retiree Mary Carter and her husband, William, said they never received any forms before two unexpected brushes with foreclosure.
The Carters had grown accustomed to the visits by lender and loan servicer representatives who would drop by unannounced to verify they still occupied the property as required under the terms of the loan. They were sitting in their carport the last time a reverse mortgage inspector checked up on them.
Carter, a former elementary school teacher, said her 75-year-old husband would sign any paperwork handed to him at the end of these meetings.
But the last visit, which set the elderly couple on the path to two separate foreclosure suits for non-occupancy, was different. This time they said the inspector asked them to clear the driveway so he could take a photograph without them. They and a friend visiting from next door complied.
“He just said we couldn’t be in the picture, we had to move, so we all moved out of the way,” Carter said. “That’s when they started saying we didn’t live here.”
What followed stunned the couple: Oklahoma-based Mortgage lender Finance of America Reverse LLC claimed they defaulted on their loan by moving out of the home. “I can’t fathom why there would be any indication they weren’t occupying the property,” said the Carters’ attorney, Sarah Barker. “They don’t travel out of state. Their things are in the house.”
Finance of America attorneys at Greenspoon Marder declined comment.
Facing foreclosure in 2013, the Carters were forced to prove residency to dismiss the case. But that victory was short-lived, as an almost identical lawsuit followed within three years.
“It was the same default reason in the complaint,” Barker said. “Through the first lawsuit it was clear the Carters were living there, so we can’t understand why the second lawsuit would even be filed. We can’t understand why the first one was filed.”
Finance of America filed for foreclosure with a single-count complaint in 2016, calling due more than $119,925 in principal, plus interest, escrow, attorneys’ fees and other charges.
The seniors again beat back that suit, but still fear they’ll lose their home.
“We can’t afford to fight without help from Legal Aid,” Carter said. “We’re worried there’s going to be another foreclosure.”
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