Assume mortgage with transfer-on-death deed

Daughter worries bank will call loan due before she can find a job

By Inman News Feed
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Daughter worries bank will call loan due before she can find a job

Benny Kass
Inman News™

DEAR BENNY: My mother died in February of this year. About a month before her death she executed a beneficiary deed leaving the home to me, her daughter. I was also the sole beneficiary of her will. She had no other assets (only debt) and so there was no probate.

My son and I have lived with her in this home for the past 18 years. I've been making payments since her death (she had them set up to be deducted from her checking account with the exception of her equity loan). I did not tell them of her passing, but she apparently requested information about refinancing just before her death and they found out.

Two months ago they sent a letter asking what her estate planned to do with the house. My attorney sent a letter indicating that her relatives would make a decision within 60 days. That time is almost up and I'm afraid they are going to take the house away from us.

As I've been unemployed since her death, I'm barely able to make the payments, but want to keep this house. I don't think there is any way I can get financing on my own at this time. I was hoping to be able to just continue to make the payments, but I think they are going to want me to finance it in my name, which is not possible at the moment.

Can they just allow me to take over the payments and not get a new loan? If so, how do I go about making that happen? Just to be clear, she had a mortgage and an equity loan, and the payments are current on both and have never been late.

I'm desperate not to lose our home, but can't see a way to keep this house unless they will allow me to take over payments and then hope that I get a job soon that will allow me to do that. I have some savings left to make the payments a while longer until I can find a job. --Ann

DEAR ANN: There is a federal law on the books called the Garn-St. Germain Depository Institutions Act. Among its many provisions there is a section dealing with "due-on-sale clauses."

Such clauses are generally found in most deeds of trusts (mortgages). Basically, they state that if you sell your property, your borrower cannot assume your existing mortgage but must obtain one on his or her own. The objective was to prohibit buyers from taking over a very-low-interest-rate loan that the seller may have had.

However, the law spells out a number of situations in which lenders are specifically prohibited from exercising the due-on-sale clause. One such exception is where there is "a transfer to a relative resulting from the death of a borrower."

You can find a lot of information on the Internet, merely by typing in "due on sale" on your favorite search engine.

Tell your attorney to rely on this law, and tell the lender it has no right to call your loan.

DEAR BENNY: In a previous column, a homebuyer had a problem concerning a warranty he never got, and you gave him a few good ideas. I just do not understand why you did not instruct him to contact his lawyer who represented him at his closing. Is this not one of the reasons we have our own lawyer at closings? --Bill

DEAR BILL: You are referring to an earlier column where a reader had warranty issues with his developer. I did not instruct him to contact the lawyer who represented him at the closing for several reasons.

First, my column is carried in many papers throughout the United States, and settlement procedures differ from state to state.

In New York, for example, I understand that the settlement is often held in the office of the bank's lawyer, although buyers are instructed to have their own attorney present also. In the Western U.S., the settlement is called "an escrow closing," and often there is no attorney present on either side.

And in many jurisdictions, such as Washington, D.C., or Maryland, where I practice law, settlements take place either in an attorney's office or at a title insurance company where lawyers may not be present.

Clearly, however, if the buyer has his or her own attorney, and is comfortable with him, that attorney can be consulted on any warranty claims, or any other legal issue for that matter.

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