Do you have to make mortgage payments for the deceased?
July 22, 2007 6:49 PM   Subscribe

Someone died. Does her family have to keep paying the mortgage payments? Does interest keep accruing? Can they rent it out during this period? There was no will. (This is in California.)

The "can they rent it out" part becomes more crucial since they wouldn't mind keeping the house as an investment property, or at least holding it until the market strengthens. But getting their own mortgage for the property is only going to get harder (and ultimately be more burdensome) the more unpaid interest gets tacked on to what is owed. The house was bought fairly recently, and since it's not clear just how bad the market is now, it's not clear what profit (if any) would come from the sale of the house at this point. Could they stall until the market solidifies?

Though there was no will, no one is going to contest who should be the executor/administrator of the estate or who should inherit the property.

I would also appreciate any "simple guide to probate in California"-type resources. I've been even thinking about finding some law-school-cramming book. (The BarBri property guide?) They're going to hire a lawyer but it's going to take a couple weeks to do that.

(You would think this would be an easy question to Google, but "get a mortgage in Death Valley!" has been the least of my search result problems.)
posted by salvia to Work & Money (9 answers total)
Best answer: First of all, they need to get a copy of the mortgage and read it, and they have to speak to someone at the mortgage company. Some mortgage companies require the mortgagor to take out insurance that will pay out the mortgage on death as part of qualifying, some don't.

They really can't do anything without this information, which they likely cannot get anywhere other than the mortgage company.
posted by watsondog at 6:57 PM on July 22, 2007

Response by poster: Thanks, watsondog. I know they've looked at the mortgage (and that therefore this mortgage probably does not include any easy solutions like that), but I won't be able to ask until later tonight.
posted by salvia at 7:08 PM on July 22, 2007

Best answer: Nolo?
posted by prettyboyfloyd at 7:45 PM on July 22, 2007

Also (and I don't know how this works in California specifically) it's important to know what else is on the title - easements, restrictions, and the like.

In case you haven't found it yet, here is
the California Probate Code dealing with intestacy
posted by watsondog at 8:07 PM on July 22, 2007

Well, somebody has to pay it, or the bank is going to foreclose.

Quite frequently, mortgage insurance only pays the balance of the debt if the proceeds from the foreclosure sale are insufficient, so mortgage insurance won't necessarily help you keep the house.

The bank, however, may not object (and depending on the terms of the loan may not even have the right to object) to someone else making the monthly payments, so refinancing might be unnecessary.
posted by Mr. President Dr. Steve Elvis America at 11:30 PM on July 22, 2007

Best answer: I just went through a similar thing about two years ago when my father died, also intestate, also with a mortgage, also in California.

Different mortgages specify different requirements and some say that the house has to be owner occupied. With that said, most mortgage companies aren't going to care as long as the check gets there every month.

Probate is, for some reason, extremely complicated (at least it was for me). I think that this person's family should get a lawyer asap; I wish I had done it sooner. I don't know why it would take a few weeks to get a lawyer, when I realized how much it was needed I had one in a day.

While finding a guide to probate might be helpful, I wouldn't think that the average person could handle it without quitting their job and dedicating their life to it. I know your question was about the house and I'm getting to that...

During probate the house is either going to have to be sold or transfered into the name of an heir (we sold ours). The money to pay the lawyer is directly tied to the value of the estate, so unless the deceased has some liquid assets around (approximately 3% of the value of the house) then they are going to have to sell it to pay the lawyer. Another thing to consider is that the lawyer is paid from the value of the house, not the equity of the house. For example if the house is worth $500,000 but there is a $490,000 mortgage on the property, then the lawyer will be paid about $15,000. This would make their gain approximately $0 dollars.

As far as the mortgage goes, the family might be able to get a forbearance from the mortgage company (I hope this isn't through Countywide Mortgage). However someone will likely have to be appointed administrator of the estate before the mortgage company will even talk to them.

The family should also know that if they can't pay the mortgage it should take a few months before the bank can foreclose and you no longer have to worry about what it will do to the credit score of the deceased. Interest and payments will continue to accumulate.

Another thing is that if the house is worth less than is owed, and there are no other assets, and the house cannot be rented out for the price of the mortgage (which is common is CA since the popping of the real estate bubble) then it might be best to wash their hand of the whole thing, and maybe collect some life insurance money, if there was any. It would certainly be a lot easier.

If it isn't obvious- IANAL.

Good luck and email if you have any questions that I haven't answered.
posted by Brachiosaurus at 11:52 PM on July 22, 2007

I concur, probate lawyer *NOW*. The situation may seem simple at the moment, but things can become very ridiculous very quickly when relatives and money issues meet.

If the house was bought recently (mid 2005-onwards) and with a "funny" mortgage (ARM or IO) then I'd wager that there is very little chance of selling it for anything but a loss (meaning someone on the selling side has to bring a check to the closing). There wouldn't have been enough time to build up enough equity to counter the decline in the market. As long as only the dead person's name is on the mortgage (no co-signers), then the best thing to do might be to walk away.

However, if the family is confident that they'll be in the house long term (10+ years), then assume the mortgage payments. If the mortgage currently isn't a fixed rate then I'd strongly recommend re-financing into a fixed rate if at all possible. I see interest rates only going up the next few years as credit tightens from the spreading sub-prime fallout.
posted by de void at 6:15 AM on July 23, 2007

Response by poster: Well, somebody has to pay it, or the bank is going to foreclose.

Okay. I thought all the assets and debits were somehow frozen, with all the creditors understanding that they have to hold their horses while a court decides who gets paid how much (kinda like bankruptcy, not that I understand that either).

I don't know why it would take a few weeks to get a lawyer

That was just my guess, given all the other stuff they're also dealing with. It sounds like it's worth making that top priority. They have a recommendation, so now they just have to do a bit of due diligence on the person.

As far as the mortgage goes, the family might be able to get a forbearance from the mortgage company

Good idea, thanks.

and with a "funny" mortgage

It's a normal mortgage, thank goodness, and it was bought a few years back, so there is probably some equity, though it's hard to know how much, since there are several other houses for sale in that neighborhood.
posted by salvia at 8:20 AM on July 23, 2007

Best answer: One thing you might consider doing is to get an appraisal of the property soon. Any profit or loss from the sale of the house is a taxable event to the heir, but only on the property's change in value since the date of death. An apprisal also lets you evaluate the total value of the estate, in case there are any estate taxes. Having an appraisal taken near the date of death makes dealing with the IRS much less painful.
posted by Daddio at 11:37 AM on July 23, 2007

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