Home never went to probate mortgage company won't accept payments

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Home never went to probate mortgage company won't accept payments

Rich Hupper
Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes

Hello BP 

I have the following scenario I am trying to wrap my head around right now:

Neil owned a home and has it mortgaged with Citi Mortgage. Neil has owned it for 50 years and allowed his daughter Anne to live there for the past 20 years with her family. 

Neil became sick in 2013 and died in 2014. He died testate ( with a will ) with his daughter Anne named as the devisee for the property she currently resides.

Before Neil died Anne was added to the deed. Also before Neil died "seterus inc" either bought the mortgage or is now the loan servicing company ( Anne was unclear during our conversation ).

After Neil died Anne tried to make payments for the mortgage but Seterus told her they cannot accept her payments because she is not the person named on the mortgage. 

Lo and behold, she has not been able to make mortgage payments since october 2014.

This scenario raises many questions for me

1) When a property is mortgaged and the mortgagor dies but the real property  is bequeathed to a devisee; what happens to the due on sale clause found in most mortgages?

2) Is this title issue the reason properties go to probate?

3) What would be her best course of action here, especially since she does not want to lose her home.

4) What type of attorney should I refer her to?

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James Miller
Attorney · Fort Worth, TX · Member since 2015 · 372 posts · 176 votes
10y

Probate attorney, and ASAP. And, each state is going to be different on what the creditor can and can't do regarding the mortgage. In TX, the creditor can't foreclose for a certain period of time, and then after that time they can call the note due / foreclose, or they can just let the mortgage ride and keep their security interest (called "preferred debt and lien" in TX). 

(I'm a lawyer, but I'm not your lawyer. http://lawjrm.com)

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  • Brandon Battle
    Real Estate Agent · Buena Park, CA · Member since 2016 · 743 posts · 424 votes
    10y
    She needs a probate attorney immediately to straighten out the mess before they begin or complete the forclosure process.Anybody can make the payments on the property so that is a load of crap they are not accepting them.The attorney can stop them from hurting her immediately with a court order so don't delay this any further.
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  • Chris Soignier
    Real Estate Broker · North Richland Hills, TX · Member since 2013 · 1k+ posts · 607 votes
    10y
    Originally posted by @Brandon Battle:

    Anybody can make the payments on the property so that is a load of crap they are not accepting them.

    Ever hear of a due on sale clause?    They're not widely enforced, but they are legally binding.    Sure, anybody can make payments, but that doesn't mean they have to accept (or keep accepting) them.

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  • Account Closed
    Investor · San Antonio, TX · Member since 2014 · 142 posts · 104 votes
    10y

    @Rich Hupper First, you say that Neil added Anne to the deed before he died. What you don't say is how she was added. If she was added as a joint tenant, the property would not be part of Neil's estate. Because of the joint tenancy Anne would own the property, no probate would be required. That's one of the advantages of joint tenancy.  

    The due on sale clause is a separate matter.  The Garn-St.Germaine Act of 1982 was the law that entitled lenders to enforce the due on sale clause. However it had six exceptions that set forth situations where the lender could not enforce a due on sale clause. If I were you I would google those exceptions, because several of them apply to this situation. You can't exercise the due on sale clause against a surviving joint tenant. It would violate the Garn St. Germaine Act. Further, you can't exercise the due on sale clause against a related person who gets title by inheritance. I doubt this one would apply, because it sounds like Anne was a joint tenant. But just in case Anne was not a joint tenant, but maybe a tenant in common, it would apply.

    Rich, it's possible you don't know all the details. One scenario that could have happened is that Neil didn't make some of the payments prior to his death. So when Anne tried to pay later, the lender refused it because it did not bring the note current. Anne would have had to pay all the back payments, late fees, and other costs if they have foreclosed.

    I would suggest a real estate lawyer. He could contact the lender directly, and find out what she owes. She'll need to pay it all, because they won't accept a partial payment. If they have called the loan, it is more than likely because she is in arrears since 2014.  If they called the loan based on a due on sale clause, they have violated federal law.

    Jim Piper

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  • Rick H.
    Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
    10y

    If Anne is direct lineal heir, irrespective of adding her on title via deed or probate court order of distribution, the mortgage services is now liable to Anne and must accept payments, as previously mentioned re Garn St. Germaine Act. 

    Where these things become problematics is when the property owner and debtor in succession has spent the money and the lender/servicer allows reinstatement but there is no money to pay.

    Probably attorney time.

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  • Dave Toelkes
    Investor · Pawleys Island, SC · Member since 2008 · 1k+ posts · 837 votes
    10y

    @Rich Hupper

    Just to expand on @Account Closed's comment.  If Anne was added to the title as a joint owner or joint tenant WITH RIGHT OF SURVIVORSHIP, then title automatically passes to Anne without need of probate. 

    If Anne was added as a joint tenant or joint owner without the "right of survivorship" phrase, then the property needs to go through probate before Anne can become the 100% titled owner.  Until probate occurs, Anne is still a 50% owner.

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  • Account Closed
    San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    10y

    It's been a long time since I learned this stuff, but I'm wondering if Anne has been paying the taxes?  That could be significant, too, if I recall my old classes correctly.

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  • James Miller
    Attorney · Fort Worth, TX · Member since 2015 · 372 posts · 176 votes
    10y

    Probate attorney, and ASAP. And, each state is going to be different on what the creditor can and can't do regarding the mortgage. In TX, the creditor can't foreclose for a certain period of time, and then after that time they can call the note due / foreclose, or they can just let the mortgage ride and keep their security interest (called "preferred debt and lien" in TX). 

    (I'm a lawyer, but I'm not your lawyer. http://lawjrm.com)

    2Reply
  • Rich Hupper
    OP
    Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
    10y

    This has been very helpful thank you everyone for the help.

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