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N.C. Ct. of App.: In re Jones- Validity of Reverse Mortgage not an issue for non-judicial foreclosure

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By Ed Boltz, 13 March, 2024

Summary:

George Jones qualified for a reverse mortgage on his home with American Advisors Group (AAG) and received the loan counseling  required under N.C.G.S. §53-269 and § 53-270,   with the counselor noting that Mr.  Jones appeared to understand and respond to "most questions".  After Mr.  Jones died,  AAG eventually commenced a non-judicial foreclosure. The Clerk of Court and subsequently the Superior Court denied the foreclosure  finding that the Note was not a valid debt as it failed to satisfy the counseling requirements.

The N.C. Court of Appeal  reversed,  finding that  while  “[a] deed executed by an incompetent grantor may be set aside by a suit in equity[.]” In re Godwin, 121 N.C. App. 703, 705, 468 S.E.2d 811, 813 (1996),  that challenge can not be raised in a non-judicial foreclosure hearing,  but must instead  “equitable defenses to the foreclosure . . . should be asserted in an action to enjoin the foreclosure sale under” N.C. Gen. Stat. § 45-21.34.=

Commentary:

Hopefully  in nearly three years since AAG initiated this non-judicial foreclosure action,  the heirs of Mr.  Jones either commenced their own equitable action in Superior Court to challenge the validity of the note,  found financing to purchase this home  or,  if that has not been decided elsewhere  (meaning there is no Rooker-Feldman bar for the bankruptcy court)  they have considered filing a Chapter 13 bankruptcy and challenging the validity of this mortgage in that venue.

To read a copy of the transcript, please see:

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