How do I handle the Mortgage company?
September 24, 2009 8:34 AM   Subscribe

Probate/mortgage/house question. You are not my lawyer, just looking for a general sense of how this will work. I am on the deed of my mother's house. She is dying of cancer. I am not on the mortgage, which is for about 90% of the home's value. When she dies, what will happen? I cannot afford to pay the mortgage prior to selling the home unless I rent out the property, which I don't want to do (would prefer to sell).

I don't think the home will go to probate because I am a co-owner, but clearly the mortgage holder will file a claim against the estate, which has essentially no assets.

My plan is to sell the home and pay off the mortgage, but what do I do about the mortgage while trying to sell the house?

Do I just call the mortgage company and tell them to be patient? Despite the market I do think the home will sell within a few months, it's a nice house in a hot neighborhood and where I live (Maine) the market is still strong in pockets.

(Note, because of the L/value ratio, she has been paying PMI, but my understanding is that does not pay off in case of holder death?)

Again, I know you are not my lawyer, I will get a lawyer when the time comes, I just want to know how the process will work.
posted by anonymous to Work & Money (9 answers total) 1 user marked this as a favorite
One thing to do would be check whether she has life insurance on the mortgage so that it would be paid out in the event of her death. Many people, especially those with children, will insure their mortgage for exactly this purpose. Your mom should know this, and if you have a look at the policy documents you can see whether she's covered.

I'm actually surprised that you were permitted to remain on title despite not having signed the mortgage documents. Most lenders will not agree to this unless the balance of the mortgage is far exceeded by the owner's equity.
posted by Pomo at 8:43 AM on September 24, 2009

I will get a lawyer when the time comes

That time is pretty much now. You really want to be well-prepared for something like this.
posted by electroboy at 8:49 AM on September 24, 2009 [2 favorites]

Seconding electroboy. Getting an attorney involved now is the best plan of action.
posted by dejah420 at 9:02 AM on September 24, 2009

Are you talking about what to do now? Or after she dies? I ask because in my state anyway there are rules about the transfer of real estate within the 6 months before someone's death.

Get an attorney. I would start with an estate attorney but they will be able to point you in the right direction if they feel a different area of expertise is in order.
posted by small_ruminant at 9:29 AM on September 24, 2009

Dude, I have some knowledge of probate law, and your question STILL made my head spin. Don't just get a lawyer, get a GOOD lawyer. And a good backup lawyer.

I'm only half kidding.
posted by Citrus at 10:40 AM on September 24, 2009

My guess--and this is not something you should act on--is that you will end up working with the lender and coming up with some sort of arrangement where they defer foreclosure proceedings (which is what would happen if the mortgage doesn't get paid) in exchange for some promise of repayment when the house sells. It's in the lender's best interest to do something like this with you, since foreclosures are expensive and there's a risk the house will fall into disrepair before they can take possession and then turn around and sell it. (And they do stuff like this all the time, in fact sometimes writing off part of the mortgage in order to get the house sold so that they can get rid of someone who can't pay. It's called a "short sale." What you're doing wouldn't be a short sale, but it would probably get approved by the same people at the lender who approve short sales.)

Anyway, even though I think you will end up working with the lender eventually, it would probably be a big mistake for you to contact them before working with an attorney. You really want to get someone who understands this and can negotiate on your behalf to keep you from getting screwed.

If I were you, I'd start off by talking to your grandmother's lawyer (if she has one already picked out to handle her estate) and then see if you can get a recommendation of someone who specializes in real estate to handle just the property-related aspects. If you can find someone who has experience or a working relationship with the lender (if it's a local bank or big national one, as opposed to some fly-by-night investment group, this may not be as improbable as it sounds), all the better.

This isn't something you want to wait on, because at least in my area, the lawyers who really know their stuff about foreclosures are swamped.

In the meantime, if you can do it without upsetting your grandmother, you might want to start taking a look at the house and making a list of any work that is going to have to be done in order to get it sold. A home inspection might not be a bad idea. You'll want the sale to go through quickly, so taking care of maintenance or repair issues out of your pocket now might save you time and money later.
posted by Kadin2048 at 10:54 AM on September 24, 2009

Kadin has it here.

When your mother passes, you'll need to communicate with the lender and discuss options. Having an attorney and a realtor in place now will help as once your mother passes, you'll be dealing with a whole boat of other issues, not the least of which will be your grief.
posted by LOLAttorney2009 at 3:21 PM on September 24, 2009

Concur with the above.

>clearly the mortgage holder will file a claim against the estate, which has essentially no assets

If there are no assets, there need not be an estate. The mortgagee does not need to file a claim. The mortgage goes with the property. If you inherit the property, you inherit subject to the mortgage.
posted by megatherium at 3:24 PM on September 24, 2009

It takes a while for all this to crash on your head, fixed amounts of time must pass, local versions of course but the idea of a big deal happening in just a week or 2 is not how things proceed, you have time to get answers.
posted by Freedomboy at 3:36 PM on September 24, 2009

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