Mortgage note in deceased parents name and taking ownership through probate

4 Replies

I have a property (father's) that I can take ownership of through probate.  The value of the property is a little higher than the mortgage balance but not much.  If I rent it we will make about $200 per month.  It was updated recently with new roof, a/c, windows, etc so should be low maintenance for a while. At least for big items.

 If I take title on the property through probate then does the lender have the right to call the note since it will not be in my name?  Supposedly there is a federal law to prevent this but not sure if the lenders get around it. "12 USC § 1701J–3 - PREEMPTION OF DUE-ON-SALE PROHIBITIONS" "(5)a transfer to a relative resulting from the death of a borrower;"

I would hate to go through the probate process to change title and have them call it.  Curious if anyone has gone through this or has any help or advice.

If the property belonged to your father, you should have no problem to take over subject-to through probate.  I did the same thing for a family member 9 years ago, and still have the house as a rental.  And besides the cash flow of $200, you will be paying down the mortgage balance each month, increasing your equity.

The Due On Sale clauses typically do not get invoked when there is a probate transfer to the surviving beneficiary such as yourself, in most cases. But every mortgage servicer is a little different. You can continue making payments as is assuming you don't have to sell it to settle the estate liabilities. Then just see if they contact you.

However, i would get a copy of the original promissory note and trust deed (or equivalent for the state) and read it carefully. Use a real estate attorney if you must. It will usually only cost you about $500 for them to read it and advise on that one subject.

You could run into problems when you go to refinance if you don't notify them of the death and let them decide if you can assume the loan. since you have no right to authorize anyone to verify the mortgage, it could prove very difficult to complete your funding, or a sale for that matter. So, if you think you'll keep the property and refinance, you may consider sending them the death certificate and letting them know you're the rightful successor and have been making the payments. Let them tell you what must be done.

@Keith A. Search Garn-St. Germaine act for list of exemptions. You're in there!

How about this play: leave property in Dad's name until which time you really see the benefit of transfer.  Have loan contact info forwarded to you. 

Or if you don't like simplicity, complete probate and put it in a trust named after Dad.

Thanks for the replies.  @Dave Metsker This is what I think I'd prefer having my name on the deed or use a trust like @Rick H. An estate attorney mentioned I could leave it in his name on everything but mentioned it may be difficult with HOA, utilities, etc. Said if power/utilities were turned off it would be difficult and HOA may require it to be able to lease it. I know you can rent them but not sure how deep they dive on that.

 Also, this mortgage is through CitiMortgage.

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