By Jessica Serrano (attorney) and Arleen Muina (Senior Paralegal)
Primarily, the death of a borrower does not extinguish the debt owed on a real property. If you are the only borrower under the loan, upon your passing, the mortgage holder (the “Bank”) has the right to enforce such debt and file a claim in your Estate, and even file for foreclosure proceedings to recover all monies owed.
To avoid foreclosure, the surviving heir(s) must follow specific procedures to continue making the mortgage payments under the terms of the loan.
Open a Probate:
The surviving heir needs to file with the Probate Court of the state of where the deceased passed or where the property was located, a Petition for Formal Administration. In said Petition for Administration, the heir requests the Court to appoint him or her as the Personal Representative of the Estate of the Deceased. This procedure allows the Personal Representative to administer all the assets of the Estate. According to Florida Statute 733.302 any individual who is 18 years old who is a resident of Florida at the time of the decedent’s death, is qualified to act as the personal representative.[i] Once the Court enters the “Letters of Administration” appointing the personal representative, the personal representative has the inherited authority to deal with and manage all the decedent’s property, including the mortgage on the property.
Apply for an assumption of mortgage:
Now that a personal representative has been appointed, the personal representative may apply for an assumption[ii] of a mortgage with the Bank and assume the loan of the deceased borrower.
It is important to note that you need to qualify for an assumption of mortgage. To do this, you need to provide the Bank with financial information such as two bank statements, two-year tax returns, two-year W2s, and your last two pay stubs, among other documents. If you are retired, you may show your retirement or social security benefits. If you have rental income, you may also use that income as a qualifying factor for the assumption of a mortgage.
Once approved for the assumption of a mortgage, the mortgage loan now transfers to that of the personal representative of the Estate. The mortgage dues will be the same as the prior borrowers.
Apply for a loan modification:
A loan modification [iii] is a viable option for the personal representative if the mortgage payments under the assumption of the mortgage are not affordable. A loan modification is requested directly from the Bank, known as “loss mitigation assistance.” You need to complete a loss mitigation application and provide the Bank with two bank statements, two-year tax returns, two-year W2s, rental income, contribution letter, your last two pay stubs, hardship letter, and other required documents., and submit to the Bank for Review. The Bank has 30 days to review your request and either approve or deny said request. If approved, the mortgage payment should be significantly lower.
Consult a Florida Foreclosure, Loss Mitigation and Probate Attorney
If you are facing any of these situations, you must hire the right team of lawyers to represent you. Especially, those lawyers who have experience negotiating assumption of mortgages, loan modifications, defending Foreclosure proceedings, and filing the necessary petitions with the Probate court to protect your inheritance. Understanding your options is a vital component of making the proper decision at the right time. Consulting with a qualified Florida Foreclosure and Probate Attorney at our law firm can offer invaluable insights and guidance tailored to your specific circumstances. Get in touch with one of our team members today.
NOTES
[i] 733.303 Persons not qualified. —
- (1) A person is not qualified to act as a personal representative if the person:
- (a) Has been convicted of a felony.
- (b) Has been convicted in any state or foreign jurisdiction of abuse, neglect, or exploitation of an elderly person or a disabled adult, as those terms are defined in s. 825.101.
- (c) Is mentally or physically unable to perform the duties.
- (d) Is under the age of 18 years.
- (2) If the person named as personal representative in the will is not qualified, letters shall be granted as provided in s. 733.301
[ii] An assumption of mortgage is a type of financing for which you must qualify to be approved. This is when you take over the debt of the original borrower and now become the new borrower under the loan.
[iii] A mortgage loan modification is a change in the terms of your loan terms. The modification is considered a type of loss mitigation assistance. In a modification, you can lower your interest rate, extend the life of the loan terms, and even receive a non-interest-bearing deferment.
