Inherited a home in foreclosure? What to do next

Can the lender foreclose after the owner dies?

Yes. The loan does not go away when the borrower dies. If payments stop, the lender can start a foreclosure, just like it would with a living borrower. Many of the same deadlines and choices may apply, but each option has its own rules, and some must be started well before a sale.

Will the lender talk to me if I am not on the loan?

It should. Federal and California rules protect many people who inherit a home, often called successors in interest. When you tell the servicer the borrower has died, it generally must explain what papers it needs to confirm you. Once you are a confirmed successor in interest, you may have federal mortgage servicing rights, such as getting information about the loan and applying for help like a loan modification. Applying does not by itself stop a foreclosure, and approval is not guaranteed.

Can I keep the loan instead of getting a new one?

Often, yes. Federal law generally stops a lender from calling the whole loan due just because a relative inherited the home and lives in it. That means you may be able to keep the existing loan and its interest rate, generally if the payments are brought current. Ask the servicer and a lawyer how this applies to you.

What are my options?

• Catch up and keep the home, using the estate, family help, or a loan modification as a successor.
• Refinance into your own name, if you have the income and the home has equity.
• Sell the home, through probate or a trust, to protect the equity for the heirs.
• Do a short sale, if the home is worth less than the loan. It avoids foreclosure only if it is approved and closes in time.

Do I need probate to sell?

It depends, and a probate or real estate attorney can tell you what applies. In general, if the home was in a living trust, the successor trustee can often sell without probate. If not, someone often needs authority from the court, through probate, before they can sell. Probate takes time, so start right away if a foreclosure is underway. Tell the servicer about any sale in progress, but opening probate or listing the home does not by itself delay a foreclosure.

First steps this week

1. Find the latest mortgage statement and any foreclosure notices.
2. Call the lender, report the death, and ask what they need to confirm you as a successor.
3. Find out whether there is a will or a trust.
4. Talk to a probate or real estate attorney quickly, especially if a sale date is set.
5. Book a free call if you want to talk about our real estate services. A call with us does not stop a foreclosure or extend a deadline.

How we help

Serve First Realty can discuss real estate services, including probate and trust sales and short sales, with a person who has the legal authority to act for the property. Ashlar LDA, Inc. can prepare documents within its lawful scope, using forms you choose and your specific instructions, with the price up front. As a legal document assistant, Ashlar LDA cannot give legal advice, decide whether probate is needed, decide who owns the home or has authority, choose forms, or recommend a legal strategy. For those questions, talk to a probate or real estate attorney.

General information, not legal advice. Sources: federal Garn-St Germain Act, 12 U.S.C. 1701j-3(d); federal mortgage servicing rules, 12 CFR 1024.30 through 1024.41; California Civil Code section 2920.7.