The deceased borrower and the daughter who kept the house

13 Replies

Once upon a time there was a borrower who took ill and gave his daughter power of attorney. Before he passed away he deeded the house to his daughter. 

Apparently, since the house belonged to the daughter, it was a no asset estate and probate was not opened. 

The daughter paid on the mortgage for about a year. The prior note owner accepted payments knowing that the borrower was deceased. 

Little ol' me bought the note last summer. The daughter defaulted. 

Straight foreclosure doesn't seem exactly right. Seems I could force a probate and look to sell the property to pay the mortgage. Daughter doesn't have foreclosure defenses, simply an eviction? Even though she holds title? 

I was afraid that I may be in an unsecured position, but our lien is prior to deed transfer. 

Daughter has asked for a new loan. We don't do that. Especially since she has stated insufficient income. 

How will my story end? 

Anyone have an Alabama attorney to recommend?

Your lien would survive the transfer to the daughter. My guess is that she is the owner and would need to be foreclosed on. I don't think you would be able to just evict her.  You also may  have to open an estate and serve the estate of the dead father with a foreclosure complaint. As the largest creditor of the estate you may be able to do this. I am not an Alabama attorney and this is not legal advice. 

In what county is the property located; I can recommend an attorney depending on location. It is a straight foreclosure.  The death is irrelevant.  In Alabama, a mortgage technically transfers title to the mortgage holder. The deceased borrower had an equity of redemption, which is the right to get the title back when the loan is paid in full. That is different from the post-foreclosure statutory right of redemption, which is a little more complicated. Contact me privately if you need information about that. The daughter inherited the equity of redemption. As an heir, she will have her own post-foreclosure statutory right of redemption after the foreclosure.

Alabama has non-judicial foreclosures.

You cannot evict to get her out. You can file an ejectment action after the foreclosure.  If she is trashing the place, there are some pre-foreclosure remedies, but they are not well known. 

Ther is No need for a lender to "open probate", Ever!  That is the heir's responsibility, if they want to sell/negotiate with legal authority.  In this case, the property Was deeded prior to death, so a probate would be totally irrelevant.....straight up foreclosure.

I agree with Wayne.  Seems straightforward to me.

thanks to all for comments. Glad we're all here to share experience and knowledge. 

Originally posted by @Denise Evans :

@Tyler Sterns and @Steve Hodgdon, Alabama is a non-judicial foreclosure state. You do not need to force the opening of an estate and serve an estate.

 Denise - Thank you for the referral offer. Home is in Bessemer. Jefferson County. 

Originally posted by @Wayne Brooks :

Ther is No need for a lender to "open probate", Ever!  That is the heir's responsibility, if they want to sell/negotiate with legal authority.  In this case, the property Was deeded prior to death, so a probate would be totally irrelevant.....straight up foreclosure.

 Lenders open up estates all the time in foreclosures. How else would you serve a dead borrower in judicial foreclosure states?

update... BK judge let her keep the house! let her keep monthly payment as is and spread arrears over 60 months. she's now in default of ordered payments. starting with motion for relief.

@Steve Hodgdon ahh joys of Alabama.

Typically in BK they will keep mortgage payment same and roll arrearages into the plan as additional payments. Typically the trustee will dismiss the case though if borrower is. It making payments

Is there equity in property or any other liens?

Note I am not a lawyer but Alabama has some tricky requirements. I believe if you tried cash for keys then it would have to go through probate based on my readings but you only would do CFK if their were no other liens.

Also in Alabama their is a 12 month redemption period so if you foreclose you could rent the property but it’s my understanding you cannot sell it and you cannot even pay off the borrower to shorten the period.

Also I was advised if you bid full payoff at foreclosure auction in Alabama you cannot go after them for a deficiency judgement either.

Again not an attorney and would be interested to get others opinions.

@Chris Seveney thanks for the thoughts. There is some equity. But payments would be fine, just not exciting in ROI. My amazement was that the BK judge let her assume a debt that was not hers. Her father owed the loan.

I didn't know about the redemption period, thanks. 

@Steve Hodgdon I'm amazed as well at what BK judges will do. We have one where the borrower claimed that she was moving into the "rental" house that her son lived in so that she could claim owner occupant status. She has three homes, one with her husband, a vacation home used as a rental, and a home rented by her son. The son quitclaimed the property to her about 10 years ago to avoid state tax liens. The BK judge didn't care. Your case in which the daughter is not the original debtor is even crazier to me....

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