Can we be forced to keep my mothers house?

February 3, 2013 10:50 AM

My mother recently passed away leaving a substantial debt. The bulk of this debt is in the form of two houses that she remortgaged. One is underwater in a very flat housing market, the other is the family house that we grew up in that my younger brother is currently living in.

It's the first house that is the issue. I am vague on the details (I live quite a bit away and have not been participating in the dealings), but here are the facts as I know them: We were told by the closest person to my mother that my mother had mortgage insurance which would have paid the mortgage off at the time of her death, however, we cannot find the mortgage agreement. We do not have a copy.

My elder brother, the executor of the estate, approached the bank, which has not been overly cooperative in this matter, to, in his words, "give them back the house". They refused. I don't know any more detail than this. The bank is attempting to renegotiate terms of the mortgage for a lesser amount and lesser rate with my brother.

There is no attachment to this house, it is not possible to rent it to break even, and there is no desire on anyone's part to be a landlord in any case. We just want the house and it's debt gone.
Is it possible that a bank can refuse to foreclose? Can't my brother just not make the mortgage payments? Do they have a claim on the rest of the estate (which is negatively valued in any case)? Are they required to give us a copy of the mortgage?

Regarding the second house, my younger brother is attempting to get a new mortgage in his name to keep that house, which I do not believe is underwater, but he does not have good credit and none of us siblings are willing to co-sign because of a lifelong history of him not meeting his financial obligations. We do, however, feel it's best for him to be able to stay in the house and he is currently (barely) meeting the existing mortgage payments. This may be the only positive asset my mother left (There is additional credit card debt). Can the bank on the first house go after the second house?
This is in New York State.
TIA

posted by anonymous to work & money (8 answers total)

The answers to these questions will depend on specific facts and you should ask a New York state estate lawyer.
posted by grouse at 10:56 AM on February 3 [4 favorites]

Look, just get an estate attorney. You need one. Creditors of an estate can go after any and all available estate assets. I don't believe that New York is a recourse state, but there's nothing to prevent the banks from refusing to foreclose and suing the estate for the balance of the mortgage. The fact that they've got a security interest in the house does not mean they are forced to treat that interest as satisfaction of the debt.

So yeah. Hire that attorney. It'll cost the estate a few grand, but the alternative is getting screwed by the banks. The attorney may also have ways of locating the insurance policy you're talking about.
posted by valkyryn at 10:58 AM on February 3 [9 favorites]

Lawyer lawyer lawyer. NY is a recourse state.
posted by holgate at 11:23 AM on February 3 [1 favorite]

Nthing the Estate Attorney. When my mother passed away, she owned a condo. She also had extensive debt, including 6 maxed out credit cards. The attorney did everything from intercept the daily mail, to getting the place cleaned out, to evicting the deadbeat roomie who was stealing from my mother, to finally selling the condo and paying off the debts. The credit card holders were so delighted that they were getting paid at all that they cut the lawyer a great deal.

The bonus of all of this was that this all happened when I was two time zones away.
posted by spinifex23 at 11:28 AM on February 3 [4 favorites]

NY is a recourse state.

I'm not licensed in New York, but I do not believe this is correct. "Recourse" in this context means that a bank can foreclose on a property, sell it, and then sue the borrower for any debt not satisfied from the proceeds. Instead, I think what New York does is simply let the bank choose: it can either foreclose on the property or sue the borrower, but not both. So if I'm right here, the bank can indeed sue the borrower, but it can't do that and take the house.
posted by valkyryn at 11:53 AM on February 3 [2 favorites]

The mortgage agreement and related mortgage insurance may have been recorded with the county recorder where the property is located. Usually you can search public records online for this using either the homeowner's name or the address of the property (or its block and lot number). Have you tried that? I have been able to find mortgage agreements from many years ago in NYC doing public records searches, but I am not sure where in NY state you are located.

You need a lawyer. There are many steps to taking care of this situation, and the particularities of the law in your state will affect what remedies are available to you. Lawyers have better luck negotiating with banks, too. Good luck.
posted by zdravo at 11:56 AM on February 3

Definitely estate attorney territory. The people who are going to try to collect from the estate are a lot better at this stuff than the average person will ever be, and if you're not careful, they will try to hang the debt around your necks. I would instruct the family to stop talking to the banks or any other creditors until an attorney has been consulted, and talk to one ASAP. Tomorrow if possible.
posted by azpenguin at 12:34 PM on February 3 [1 favorite]

IANAL, IANYL, TINLA. I am a paralegal for an estate attorney in New York State.

This is definitely something that should be handled by an attorney.

(and if this is in Western NYS, memail me.)
posted by Lucinda at 2:36 PM on February 3