The Appeals Court of Massachusetts recently decided a case stemming from a home equity conversion mortgage, also known as a reverse mortgage, between a homeowner and her lender. In Fin. Freedom Acquisition, LLC v. Laroche, 90 Mass. App. Ct. 1104 (2016), the bank sought a declaration from the court that the homeowner’s property was subject to the mortgage, despite the fact that it had been previously conveyed to her son. After a judge dismissed the bank’s claims, the bank appealed.
In Fin. Freedom Acquisition, LLC v. Laroche, two years prior to executing the reverse mortgage, the homeowner had deeded the home’s fee simple interest to her son, retaining a life estate for herself, for estate planning purposes. Later, the homeowner began researching the possibility of supplementing her income through a reverse mortgage. Deciding to move forward, the homeowner acquired a reverse mortgage from the plaintiff, secured by her home. Prior to closing on the reverse mortgage, the plaintiff discovered that the property had been deeded to the homeowner’s son and noted in the closing documents that a re-conveyance back to the homeowner would be required to complete the transaction. Nevertheless, the closing proceeded without the re-conveyance, and the bank granted the homeowner a mortgage on the property while she received proceeds from the loan. Five years later, the bank again noticed that the property had not been re-conveyed and requested that the homeowner’s son transfer the fee simple back to the homeowner. When he refused to do so, the bank brought an action seeking a declaration that the son’s remainder fee simple interest was subject to the bank’s mortgage.