Carolyn Larsen v. OneWest Bank, FSB
14-14-00485-CV
| Tex. App. | Nov 5, 2015Background
- Carolyn and Otis Larsen owned a homestead in Sealy, Texas; Otis (70) obtained an FHA-insured Home Equity Conversion Mortgage (reverse mortgage) in 2005. Carolyn was 58 at the time.
- Carolyn signed multiple loan-related forms: a Waiver of Homestead Rights, a Non-Borrower Spouse Ownership Interest Certification, and a Special Warranty Deed conveying her interest to Otis. Otis signed the Note and Deed of Trust.
- The mortgage/Note originally named Financial Freedom Senior Funding Corp.; the loan later became owned by OneWest Bank. After Otis died in 2010, OneWest demanded repayment and scheduled foreclosure.
- Carolyn sued seeking to enjoin foreclosure and to declare the Special Warranty Deed and/or the Deed of Trust void (arguing she retained homestead rights and was a borrower so loan isn’t due until her death). Trial court granted OneWest summary judgment; Carolyn appealed.
- The court analyzed whether homestead rights can be waived in reverse-mortgage context, whether the deed was a sham, whether Carolyn was a borrower under the loan documents, and whether federal HECM law prevented foreclosure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether homestead rights can be waived in connection with a reverse mortgage and whether Carolyn waived them | Carolyn: homestead rights cannot be waived (or she did not validly waive them) | OneWest: Carolyn executed Waiver of Homestead Rights and related certifications, establishing consent under Tex. Const. art. XVI, §50(k) | Waiver is permissible; Carolyn’s signed waiver and certification establish her consent — waiver effective |
| Whether the Special Warranty Deed conveying Carolyn’s interest to Otis was a sham/void | Carolyn: deed was a pretended/simulated sale to strip her homestead rights; evidence of broker coercion and lack of consideration | OneWest: no evidence it knew of any sham; plaintiff must point to record evidence showing lender’s knowledge | Court: even assuming intent questions, Carolyn failed to show evidence that OneWest knew or had reason to know deed was sham; deed not voided |
| Whether Carolyn was a ‘borrower’ under the reverse mortgage (affecting when loan becomes due) | Carolyn: Deed of Trust lists her as a borrower and federal HECM law (12 U.S.C. §1715z‑20(j)) protects spouse/homeowner so loan is not due until both die | OneWest: Note and Loan Agreement name Otis as sole borrower; all loan documents read together show Carolyn was non‑borrowing spouse; note controls over conflicting deed terms | Court: terms of the Note prevail; Carolyn failed to preserve some consent arguments on summary judgment; no genuine fact issue that she is a borrower — she is not |
| Whether federal HECM statutory/regulatory provisions barred foreclosure until both spouses died | Carolyn: §1715z‑20(j) (and Bennett) mean HECM obligations are deferred until homeowner/spouse death, preventing foreclosure now | OneWest: §1715z‑20 governs HUD insurance requirements, not lender foreclosure rights; Bennett does not bar foreclosure | Court: §1715z‑20 addresses insurance, not foreclosure timing; Bennett does not establish a no‑foreclosure rule — federal law does not defeat OneWest’s rights |
Key Cases Cited
- Williams v. Williams, 569 S.W.2d 867 (Tex. 1978) (spousal waiver of probate homestead rights can be valid)
- Fin. Comm’n of Tex. v. Norwood, 418 S.W.3d 566 (Tex. 2013) (history and constitutional context of Texas home‑equity and reverse mortgage law)
- Florey v. Estate of McConnell, 212 S.W.3d 439 (Tex. App.—Austin 2006) (homestead laws liberally construed to protect homestead)
- Pentico v. Mad‑Wayler, Inc., 964 S.W.2d 708 (Tex. App.—Corpus Christi 1998) (where note and security instrument conflict, note terms prevail)
- Odell v. Commerce Farm Credit Co., 80 S.W.2d 295 (Tex. 1935) (same principle: security instrument yields to note on conflict)
- Bennett v. Donovan, 703 F.3d 582 (D.C. Cir. 2012) (addressed HUD regulation under HECM statutes but did not hold lenders lack foreclosure rights)