New York Court Holds Failure to Pay Homeowners’ Insurance Is Not Cause for Foreclosure on Reverse Mortgage

A New York Supreme Court recently held that a lender may not foreclose on a reverse mortgage due to the mortgagee’s failure to pay homeowners’ insurance premiums, even if such language is included in the reverse mortgage itself.  See OneWest Bank v. Smith, NYLJ 1202670454135 (N.Y. Sup. Ct. Sept. 10, 2014).  In the case, the borrower ceased paying homeowners’ insurance premiums in violation of the terms of the reverse mortgage, and as a result the lender had to pay the premiums, totaling over $18,000.  The lender attempted to foreclose on the property, but the court, citing to a similar case earlier this year regarding unpaid water bills, dismissed the complaint.  (See Metlife Home Loans v. Vereen, 2014 WL 590210 (N.Y. Sup. Ct. Feb. 11, 2014)).   In doing so, it referenced the provision of the Code of Federal Regulations that governs reverse mortgages (24 CFR 206.25), and held that the purpose of a reverse mortgage is to “help senior citizens remain in their homes[.]”  Thus, the court held that the mortgagee could pay missed payments on behalf of the mortgagor and charge the payments to the mortgagor’s account.  For a copy of the blog posting on the Vereen decision, please see Riker Blog Post.

For a copy of the decision, please contact Michael O’Donnell at