Below is an article written by Attorney Peter Francis Geraci with instruction on how to stop foreclosure on an inherited property. Read more articles written by PFG at https://www.infotapes.com/Articles.
At Geraci Law, we sometimes have a client whose relative died, and they are an heir. For instance, Son is Mom’s only heir, Mom passes away, but Mom’s house is in her name, she left no will, and she had a $40,000 mortgage with payments of $600 a month.
Son obviously wants to get the title changed into his name, so he will have to file a lawsuit in Probate Court to get an Order Declaring Heirship and Distribution of the Estate. This may take 6 or 8 months. In the meantime, Son finds out that the mortgage is a year behind, and the mortgage company his filed a foreclosure.
Son wants to prevent the mortgage company from foreclosing, force it to accept a payment plan on the arrears, and force the mortgage company to accept payments on the mortgage going forward, since he does not want to pay it off. Son wants to keep paying Mom’s mortgage because he can’t refinance until the Probate Court transfers the property to him.
Good news. Son can file Chapter 13 to propose a payment plan on the past due mortgage payments, and force the mortgage company to accept his payments on mom’s mortgage in the future.
One way to get the title to the property in Son’s name immediately, if there are other heirs who do not want any part of the property, would be to get all the heirs to sign an affidavit of heirship, identifying all the heirs and stating that they all agree on the transfer of the property to Son, and have them each sign on a warranty deed from them to Son. Then, record the affidavit of heirship at the recorder of deeds, and then record the deed. Son now not only has an “equitable inheritance interest” that would enable him to file Chapter 13 regarding the property, but also title interest. Assuming Mom had no other property that required Probate, his problem is solved!
Many mortgages contain a “due on sale clause” stating that if the borrower dies or files bankruptcy, the full amount of the mortgage balance becomes immediately due. That clause is not enforceable, because of a provision in the Garn-St. Germain Act of 1982 12 U.S. Code § 1701j–3.”Preemption of due-on-sale prohibitions” which exempted inherited property from having a “due on sale” clause enforced. The Act does permit acceleration of a mortgage when property is sold, but not when a person dies and the heirs want to make the mortgage payments.
The other situations where a “due-on-sale clause’ can’t be enforced are when a home equity loan or other lien is placed, when a surviving joint tenant takes title, on transfer to a spouse or child of a co-owner because of divorce and the spouse or child will life in the home, or when a borrower transfers property into an inter-vivos living trust.
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