The whole thing feels almost like a scene from a movie. A retired lawyer from New York, a shingled house perched high above Cape Cod Bay, and a bluff that drops slowly into the Atlantic. Then, four years after the house was bought, a crew came to tear it down. The house is no longer there; what’s left is a federal lawsuit that brings up important questions that should be thought about, no matter how the case ends.
The five-bedroom Wellfleet home was bought by 66-year-old John G. Bonomi Jr. in November 2021 for about $7.8 million Australian dollars. He got a mortgage from JPMorganChase for about $5.4 million to pay for it. People in the area had already written that the house was “endangered” before any contracts were even signed. It was known that the bluff below it was wearing away at a rate of almost two meters per year. At that rate, anyone with a calculator and a few minutes to spare could have figured out that the house would not last nearly as long as a typical mortgage term.
In 2009, Bonomi was told that he had Bipolar I Disorder. He is now asking a federal court to dismiss the loan. He makes two points of view in his argument. First, that he was having a manic episode at the time of the purchase and wasn’t able to understand or agree to the terms of the deal. Second, the loan itself was wrong; JPMorgan should have known it was lending millions of dollars against a property that was gradually sinking into the ocean, since it had paid for multiple appraisals and reportedly looked for engineering reports on the erosion. The bank says it did nothing wrong and acted in good faith, which is what businesses do.
It’s still not clear if Bonomi will meet the legal requirements to question a contract on the grounds of mental capacity. Such challenges are legal in New York, but the burden of proof is really hard to meet. That being said, his lawsuit does, almost by accident, show how coastal risks sometimes get through the mortgage process and sometimes don’t.
Here’s what you should know about that. According to Fannie Mae’s guidelines for standard appraisals, risks like erosion should only be taken into account if they have been shown to have an impact on the property’s market value. If similar homes in the area are still going for millions of dollars, it could be said that the market is taking on the risk, or ignoring it. Also, by the same rules, appraisers are not supposed to or should act as environmental experts. Not geological prognosis, but condition and marketability are what they do for a living. After that, lenders decide if more inspections are needed.
The Wellfleet property had a history that was written down and went far beyond what is usually disclosed. Those who owned the land before were warned during the 2010 permit process. As a buffer, they trucked in thousands of cubic yards of sand. The town said no to their plans for a stone revetment, and they were still fighting that decision when they put the house on the market. After some time, a coastal expert found that storms in the early to mid-2010s caused erosion rates near the property to sometimes be almost twice the long-term averages. A cottage nearby was torn down earlier this year by the Cape Cod National Seashore because erosion had left only three meters of bluff between it and the water.
Still, the market as a whole kept going up. From 2019 to 2024, the median listing price in Wellfleet went up by more than 126%. Views of the ocean, easy access to water, and a lack of something are all things that people want even though the ground beneath them is slowly disappearing. Di Jin, a marine resource economist at the Woods Hole Oceanographic Institution, says it straight out: buyers can’t tell the difference between the benefit and the risk. That change doesn’t just affect how people act; it also changes how they value things, which is based on what the market is doing.
As this case has been going on, it seems like no one involved in the Bonomi deal did anything that most people would consider obviously risky. This is exactly what makes the case uncomfortable. The bank did things the right way. The appraisers did what they were supposed to do. The buyer bought something; it’s up to the court to decide if they did so in good faith. In the meantime, the bluff kept doing what bluffs do.
It’s not just a house that gets torn down in the end. The idea is that the systems meant to protect buyers and lenders have taken into account the fact that the coast doesn’t stay still.
