Private attorney, legal aid join forces on reverse mortgage cases
'It again gives poor people an argument: "If you sue me, I’m going to get my attorneys’ fees if I win"'
Paul Regensdorf
A combined effort between legal aid agencies and a volunteer lawyer to help clients facing reverse mortgage foreclosures may be providing a blueprint to help reverse financial constraints faced by legal aid offices.
Palm City attorney Paul Regensdorf has worked with Coast to Coast Legal Services of South Florida and Jacksonville Area Legal Aid, among others, in a joint effort that, using state law on fee awards, can generate fees for both the volunteer lawyer and the legal aid offices.
As might be expected, the legal aid offices have high praise for the help they received from Regensdorf, while he in turn says it’s the “warriors” in the legal aid staffs who developed the cases and deserve most of the credit.
To his way of thinking, Regensdorf is an ornament on a Christmas tree.
“The Christmas tree is far bigger and broader than what I do and what I have done,” he said. “To focus on one ornament is unfair to the trunk of the tree, which is the legal aid team.”
And beyond admiring the tree, “we need to feed the tree because the tree has to keep growing and expanding in difficult times and this may be one of those difficult times,” Regensdorf said. “You put things back into the tree, so the tree grows and it’s stronger and bigger. Who knows what the future is going to bring with post pandemic income [for legal aid]?”
His solution is to use current rules and laws, particularly F.S. §57.105(7), to get fees when prevailing in a case. While various laws and rules allow prevailing parties in cases to get attorneys’ fees, in some instances laws provide that only one party is entitled to the fees.
F.S. §57.105(7) addresses that in a “very clean and very simple” way, Regensdorf said, “If one side gets fees, the other side gets fees. That unlocked the ability to get fees in these reverse mortgage cases.”
“Reverse mortgages are a valuable financial tool used properly and understood going in,” Regensdorf explained. “It allows senior citizens and older people to take the equity of their house, which is usually for people of modest means, their largest asset, and use it while they’re alive, rather than let it sit there unappreciated until they die. It’s like a home equity loan.
“As long as you live in the house, you don’t have to pay it back. If you move or you stop paying insurance and taxes, then the bank can foreclose the house and sell it.”
The federal government gets involved by guaranteeing loans.
“That’s how it should be when things go well. The government guarantees the banks a decent return on their investment and mom and dad get their equity out of the house,” he said.
Regensdorf thinks the 2008 financial crisis shook up the reverse mortgage market. Banks found many times people were living longer than expected, delaying repayment of the loans. And housing values plummeted, reducing the amount they would eventually receive.
Whatever the reason, there has been a spike in reverse mortgage foreclosures.
“In my opinion, banks looked for ways to get people out of these houses; this was a program designed to keep older people in their houses,” Regensdorf said.
Katianna Mazard, director of the Senior Law Unit for Coast to Coast, said in three cases where Regensdorf helped, one involved the bank claiming the borrower no longer lived in the home when he did. In two others, the borrowing spouse had died, and the banks moved to evict the surviving non-borrowing spouse.
In the Clay County case where Regensdorf worked with Jacksonville Area Legal Aid, the case involved an allegation the senior citizen no longer lived in the home, according to JALA Executive Director Jim Kowalski.
As Regensdorf explained, some banks have taken to mailing an annual notice asking the borrowers to verify they are still in the home — even though such a notice is not required as part of the reverse mortgage. Seniors, leery of scam mailings, frequently ignore the notices and the banks then seek foreclosure alleging the homeowner has left the house.
In the Clay County case, Kowalski wryly noted the bank alleged the senior had left the house and then served the case papers to him at the house, where he of course still lived.
The cases can be daunting.
“You really need some significant guns to go toe to toe [with the banks],” Kowalski said. “One of the things that has been most complicated and puts our clients up against some of the largest and most well-prepared litigation firms in the country have been reverse mortgage cases.”
In reverse mortgage as well as other types of cases, “You’ve got a legal aid lawyer with subject matter knowledge, but perhaps not a top level of experience in terms of trial experience and appellate experience,” he said.
“Paul with his appellate skill set and trial skill set has been one of the critical lawyers who has helped us spot these cases and educate legal aid offices that don’t have the trial background and don’t know how to handle complicated litigation matters.”
Mazard expanded on the difficulties. Although borrowers get counseling, it’s still confusing, and many times unscrupulous lenders set out with the intention of scamming the homeowners.
Besides that, “these types of cases invoke state and federal property laws, federal housing laws, state fraud and equity claims, and issues with HUD regulations. Moreover, the federal foreclosure legal landscape is constantly changing due to emerging caselaw setting legal precedent and subsequent evolving state law,” Mazard said.
“Paul is able to comprehensively stay abreast of these legal nuances and changes and factual and legal issues, which are complex and multi-layered,” she added. “This ability allows Paul to effectively litigate the legal issues that arise in reverse mortgage cases and his ability to do so is crucial in winning a favorable judgment for our clients.”
Extra issues were involved in the cases where the borrowing homeowner had died and the mortgage holder attempted to evict the surviving, non-borrowing spouse, who may not have been old enough to qualify for the reverse mortgage when it was taken out.
“Banks start playing games with her rights and get her to sign documents to give up her rights,” Regensdorf said. “She signs things away. The husband dies; since he’s the only technical owner, the bank forecloses. Now she’s living here, and she has been for 20 to 30 years, and they throw her out.”
Fortunately, in the two Coast to Coast cases, “they made all kinds of mistakes” and the foreclosures were halted by the team effort, Regensdorf said.
(The outcome is not guaranteed. The Supreme Court in a 5-2 decision in another reverse mortgage case with different facts decided on June 24 that a lender could foreclose after the husband’s death because the surviving wife’s name had not appeared on the note or loan documents, only the mortgage. The majority held under court precedents the note controlled.)
As tricky as the underlying reverse mortgage is the matter of attorneys’ fees. Many reverse mortgages had clauses specifying only the lenders would get fees — which was addressed by the state law — and sometimes lenders argued the type of loan action did not allow for fees.
Recent court decisions cleared that latter question up, Regensdorf said. He also noted that fees can be awarded in eviction cases and recent Florida Supreme Court decisions found credit card, similar consumer debt, and foreclosure cases also qualify for attorneys’ fees.
The court held those types of actions fell under F.S. §57.105(7). (See story here.)
“It again gives poor people an argument: ‘If you sue me, I’m going to get my attorneys’ fees if I win,’” Regensdorf said. “It will attract lawyers to help legal aid. Legal aid is going to have a lot of those cases. If they can have a stable of lawyers, they’ll help the clients and also in many cases feed the tree.”
While Regensdorf’s main concern is a sustainable system that both helps legal aid and draws in volunteer attorneys, Coast to Coast officials say they benefitted in other ways. Besides his direct representation in their cases, Regensdorf also conducted training and seminars for legal aid and volunteer attorneys handling similar cases.
“To work with Paul is to work with a master in the art of law,” Mazard said. “If there is a legal standard, Paul knows it; if there’s a factual scenario, Paul has experienced it; and if there’s a compromise to make; Paul can negotiate it. He has a wealth of knowledge. We learn so much from working with Paul because he analyzes every possible angle of a case. He likes to strategize a good attack on the opposing party. Paul also has a big heart. He is dedicated to seeking justice for our low-income senior population.”
Kowalski said the concept of bringing in experienced co-counsels and then splitting attorneys’ fees when awarded has been a common strategy for years.
“This is something that probably grew out of the consumer litigation world,” he said. “I’d been co-counseling with legal aid for decades [as a private attorney], well before I came to JALA,” he said.
He also foresees a continuing need. While the COVID-19 pandemic led to a reduction of reverse mortgage filings, Kowalski expects that to be temporary.
“All of our consumer lawyers were litigating reverse mortgage cases for occupancies where the owner never didn’t occupy or fail to pay taxes or insurance, where the HUD regulations require the lender to offer a work around and they weren’t offering a work around,” he said.
Kowalski added, “Florida has the third highest number of reverse mortgages in the country.”
Meeting those and other challenges will require help.
“Every legal aid [agency], I would hazard a guess, relies on a small group of trial lawyers to help with these complicated cases, but you have to do it intentionally,” Kowalski said. “You have to seek the help, and you have to accept the help. In Paul’s case, he has done this around the state, which is a gift.”
