What Happens to a Mortgage When the Borrower Dies?
When a homeowner dies, the lender can foreclose, but the foreclosure must name the heirs, executors, and administrators.
When a homeowner or mortgage borrower dies, their Will normally dictates who will be in charge of their property, such as an heir, executor, or administrator. This person will then have to decide what they want to do with the property, such as selling it, continuing to pay the existing mortgage, or seeking a loan modification.
Can the bank foreclose if the homeowner dies? Sadly, the answer is yes, as long as they can prove they have the right to foreclose.
What if There is No Will?
If the homeowner dies without a Will, the ownership of the property passes to the closest family member according to the New Jersey laws of intestacy and appointed by probate court.
What Happens to a Mortgage When it Transfers to an Heir?
Although a person’s death does not automatically dissolve their mortgage, no one is required to continue paying it, unless they are a co-signer or co-borrower. If a person inherits a home (and its mortgage), they can choose to try to Modify the Mortgage and Assume the Loan to take over responsibility for the payments.
If no one takes over mortgage payments for the deceased’s home, the lender will begin the foreclosure process.
Can the Bank Foreclose During Probate?
“Probate” is the legal process in which the validity of the deceased’s Will is confirmed, their wishes are honored, and their assets are distributed appropriately. A person’s home, and its associated mortgage, are counted among these assets and considered as part of the deceased’s estate.
Unfortunately, the bank is still able to foreclose on a property during probate as long as it can prove that it has the legal right to proceed.
Is a Lender Allowed to Foreclose Once the Homeowner Dies?
If the property is in foreclosure when the original borrower dies, the mortgage lender will sometimes continue with the foreclosure process without informing their heir(s), which could possibly result in the home being sold in a Sheriff Sale. Unfortunately, this is a common situation where heirs find out about the foreclosure too late and are left scrambling to get ahead of the situation.
My Family Member Died, and the Bank is Scheduling a Sheriff Sale of their Property. What Should I Do?
If you are the heir or executor of a property that is in foreclosure, and the bank is moving ahead with foreclosure or a sheriff sale without naming you and giving you notice of the foreclosure, contact Ira J. Metrick today. We can file a motion that will temporarily halt the foreclosure process, and help you assess your options for how to avoid the foreclosure.
For further information regarding Sheriff Sales or Loan Modifications, please refer to our NJ Sheriff Sale Timeline and NJ Loan Modification Timelines.
