If a judgment debtor is at least 62 years old and is a home owner, he or she may have taken out a reverse mortgage on his own home. If so, is it possible for a judgment creditor to successfully execute a garnishment of the reverse mortgage payments? The best answer to this question is “Maybe.”
You may be tired of hearing this, but the fact is that it all depends on which court jurisdiction is applicable to your judgment enforcement. As we have said so many times, the statutes and rules of procedure vary from state to state and in some cases by federal jurisdiction. What is possible in New Hampshire, for example, may not be allowed in New Mexico. One has to look at the statutes, rules, and case law.
A reverse mortgage is based on a contract where the property owner grants a mortgage to a lender. The lender pays to the mortgagor either a lump sum payment or a series of payments. The borrower is not obligated to pay the loan back during his lifetime. The bank agrees that if the loan is not repaid earlier, then the loan can be repaid by the sale of the property after the death of the borrower.
It is not unusual for a senior citizen to enter into a reverse mortgage agreement where he will receive a monthly payment stream for the remainder of his life. This stream of payments or cash flow may prove to be very tempting to a judgment creditor that is determined to collect his judgment money.
A garnishment is a post judgment remedy for collecting a judgment. In garnishment, a creditor is able to reach a judgment debtor’s assets while they are in the hands of a third party. Common examples would be a wage garnishment where the 3rd party is the employer of the judgment debtor, or a bank garnishment where the bank is the party holding assets due to the debtor. Garnishing a reverse mortgage would probably best be described as a form of bank levy or bank garnishment.
If we are able to successfully garnish the reverse mortgage payment stream from the bank or lender, we may establish a long term cash flow for ourselves. The funds that we garnish could possibly pay off the entire judgment debt due to us. At the very least it could put a good dent in it.
In some situations a borrower will get all of the money from his reverse mortgage in a single lump sum. In these cases, there could be a bigger payday for a judgment creditor who successfully garnishes that money.
As far as we have been able to discover, garnishing a reverse mortgage seems to be a rare occurrence. It appears that it may not be a realistic option as a judgment collection tool in some jurisdictions. We would venture to say that even among experienced judgment lawyers or collection attorneys, there are not many of them that have ventured into the area of garnishing reverse mortgage payments. However, that does not mean that it is not doable. If the possibility of implementing garnishment procedures to attach or seize reverse mortgage money interests you, then we recommend that you thoroughly review the law, and jurisdictional rules of procedure which apply. We also feel that a close inspection of the actual reverse mortgage contract would be in order. In any case, consulting with a well qualified attorney would be advisable.
You should be able to find out whether your judgment obligor has taken out a reverse mortgage by checking the records filed at the recorders office or probate office in the county where his home is located. Also, don’t neglect to check the records in any other county where he may have a second home.
Don’t leave any stone unturned in your quest to discover how to collect from your judgment debtor.