Inheriting a Loved One’s Mortgage Loan

Some new guidelines were issued late last year to prevent homes of the recently deceased from being foreclosed upon right away. These rules from the CFPB (Consumer Financial Protection Bureau) require lenders to come up with procedures for heirs of home borrowers.

The goal is to help a loved one who inherits a mortgaged property to take ownership of the loan while accessing payment assistance at the same time. Often the spouse of a deceased homeowner is dealing with medical and other final expenses just as they are taking over the mortgage payments. This has too often led to foreclosure.

With the new guidelines in place, those who inherit a mortgaged home should be able to more easily assume the loan and seek a loan modification if necessary.

The rules can help any survivors, whether they are the children, spouse, or other successors of the deceased homeowner. Many lenders simply refused to speak with these parties, demanding a lot of paperwork be completed instead. Now the CFPB has declared that lenders should promptly offer successors of mortgaged property a reasonable list of documentation required right away.

Lenders must also let the survivors know the status of the loan: is the loan current? Is it in foreclosure, or will it soon be? Was there a modification in place when the original borrower passed away? Is the survivor eligible for loan modification or other options?

When these questions arise, the lender should promptly provide the necessary information to the inheritors of the deceased’s estate. Lenders should also let inheritors know the consequences of taking over a loved one’s loan after death.

These aren’t new laws, just guidelines that lenders are being asked to follow. Fannie Mae, the nation’s largest mortgage lender, has already issued directives to the servicers of its loans, requiring heirs be allowed to take over loans while pursuing loan modifications.

When it comes to preventing foreclosure, a HUD-approved housing counselor can help the heirs of recently deceased homeowners, or anyone who thinks a loan modification might be what they need. Call us at (800) 294-3896 if you need help.