Pub. 9 2018 Issue 3

www.wvbankers.org 26 West Virginia Banker C onsumers in West Virginia have found a new subject on which to file lawsuits. Within the past couple of years, litigation over reverse mortgages has become a bigger part of consumer lending litigation in West Virginia. Reverse mortgages, also known as “home equity conversion mortgages,” allow an individual to obtain payments from a lender based on the amount of equity in the individual’s home. Unlike a conventional mortgage, in a reverse mortgage the homeowner never be- comes personally liable to repay the loan. After the homeowner dies, the lender obtains title to the home. In 1996, our legislature enacted the West Virginia Reverse Mortgage Ena- bling Act, which permitted the making of reverse mortgages in West Virgin- ia. Prior to the Enabling Act, reverse mortgages were precluded under West Virginia law. Consumers now are taking claims tradi- tionally found in conventional mortgage litigation and testing them in reverse mortgage litigation. Three recent court decisions in West Virginia show how courts are reacting to those claims. I.Unconscionable Inducement One of the claims consumers have launched against reverse mortgages is “Unconscionable Inducement.” This claim alleges that the borrower only entered into the loan because of “af- firmative misrepresentations or active deceit” by the lender. This claim was analyzed earlier in 2018 in Lavis v. Reverse Mortgage Solutions, LLC. There, the borrower alleged that her reverse mortgage loan should be forgiven because the lender’s agent made misrepresentations to her, includ- ing telling her there was no interest on her loan, the loan was a government loan, and she would not have to pay for hazard insurance. She further alleged that her loan counseling was conducted by someone affiliated with the lender and was not independent. The court looked to the loan docu- ments, which expressly set forth the in- terest rate, the government’s role in the loan, and the requirement that the bor- rower pay hazard insurance. Further, the court found that the borrower signed a counseling verification form stating she Reverse Mortgages Becoming a Bigger Part of Litigation in West Virginia By Nicholas P. Mooney II