Banks that do Reverse Mortgages

The U.S. District Court for the District of Minnesota has held that a SNB is not subject to state legislation that would limit the amount of money it can charge in principle to grant a reverse mortgages credit. On November 1, 2011, in Taft v. Wells Fargo Banque, N.A., the plaintiff held in an allegation collective lawsuit that the banky had infringed Minnesota and South Dakota by incorporating originals, service costs, and mortgages costs in the face amount of its parent's reverse mortgages.

In the first place, the CFI dismissed its claim that the determination of the legal option of the credit contract discouraged the recourse of the banks to pre-emption and demanded the implementation of the Minnesota Act. Instead, the courts found that the clause provided that the contract would be subject to Swiss Federal legislation and the laws in which the pledged assets were situated.

It also dismissed the plaintiff's allegation that Minnesota and South Dakota, by withdrawing from the National Housing Act (NHA), could set the upper limit for "the amount of interest that can be levied on reverse mortgages", which kinds of charges on which interest can be levied. There was no right for a state to withdraw from all NHA rules and the tribunal was not prepared to come to the conclusion that an opt-out would allow a state to specify "what an interest is" in order to limit the charges that may be contained in principle.

"Congressional logic would be inconsistent to empower banks to borrow reverse mortgages under rigorous domestic rules, but then to allow each state to make its own demands on what may or may not be included," Susan Richard Nelson, U.S. District judge, commented. Likewise, the CFI dismissed the plaintiff's claim that the applicant was subject to State interest rate definition because it had used its most frequently used lending agency under Section 85 of the Act to grant the credit.

Apart from rejecting its complaints that the defendant had infringed public policy by incorporating the three counts, the Tribunal rejected the applicant's infringement and unjustified actions for fortification. In the opinion of the CFI, the EBRD had not infringed the terms of the credit facility by calculating a higher interest charge than the terms of the credit facility or the Minnesota Act, and an unjustified right to fortification was excluded by the validity of a covenant.