Insurer Can Foreclose on Basketball Star’s Reverse Mortgage Even Though His Widow Still Lives in House

A federal appeals court holds that federal law does not prevent an insurer from foreclosing on a reverse mortgage after the death of the borrower -– basketball star Caldwell Jones -- even though Mr. Jones’ widow is still living in the house. Estate of Caldwell Jones, Jr. v. Live Well Financial (11th Cir., No. 17-14677, Sept. 5, 2018).

Caldwell Jones, Jr., who blocked more than 2,200 shots during his 17-year professional basketball career, obtained a reverse mortgage in 2014 on the Georgia home he lived in with his wife, Vanessa Jones. The contract defined the "borrower" to be "Caldwell Jones, Jr., a married man." Mr. Jones died later that year and the insurer asserted a right to immediate repayment of the mortgage. When Ms. Jones did not repay the loan, the insurer initiated foreclosure proceedings.

Ms. Jones filed a claim in federal court to prevent the foreclosure, arguing that federal law prohibited the insurer from foreclosing on the house while she lived in it. Under a provision in federal law, the federal government "may not insure" a reverse mortgage unless the "homeowner" does not have to repay the loan until the homeowner either dies or sells the mortgaged property and defines "homeowner" to include the borrower’s spouse. The district court granted the insurer's motion to dismiss, and Ms. Jones appealed.

The U.S. Court of Appeals, Eleventh Circuit, affirms, holding that the federal law in question only covers what the federal government can insure and does not govern the insurer's right to foreclose. The court agrees with Ms. Jones that Congress intended to safeguard widows, but even assuming that the federal government "insured Caldwell’s mortgage in violation of [federal law], [the insurer] still had a private contractual right—independent of the statute—to demand immediate payment and, if necessary, pursue foreclosure."

For the full text of this decision, go to: https://media.ca11.uscourts.gov/opinions/pub/files/201714677.pdf

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