J.M. asks from East Mc Keesport, PA on June 29, 2009
D.P. answers from Pittsburgh on June 29, 2009
First, let me offer you my sympathy on the loss of your grandmother.
Second, the role of the executor is to wrap up all of your grandmother's affairs. That includes paying off any & all debt she may have, mortgage included. (However, I believe credit card debt is forgiven with a copy of a death certificate.)
If she still owes money on the house, your father will not be responsible for the money personally, but of there are assets of your gram's available, (life insurance, bank accounts, stocks, bonds, etc) he can use that to pay off her debt.
Foreclosure is never a good option. Why doesn't your dad just list the house for sale and use the profits to pay off the mortgage?
OR, since he is the executor, he can orchestrate the sale of the house to a family member for a negotiated price. That could be a good deal for you, because it could be sold for the amount owed which is probably less than the value. But the remaining mortgage WILL be paid one way or another.
Hope this helps.
2 moms found this helpful
B.W. answers from Erie on June 30, 2009
Your dad is the executor of the estate -- legally, he is taking what they call a "fiduciary" role -- that means he's handling someone else's money, and since your Grandmom is dead, the money doesn't belong to a person as such, but if there is cash available, it does belong to the heirs once the estate is settled.
If he did not sign the note (the I O U) with the bank, then he is not liable for the loan payments, although the ESTATE is. That means that if the bank forecloses on the house, they can go after the ESTATE for any balance due. So he can't hand money out to the heirs before satisfying (paying) the debts. So, while he doesn't personally OWE any money to the bank, if he were to empty a few bank accounts that belonged to your Grandmom and divide the money between him and his siblings, then, yes, the bank could seek to have that money returned to the Estate to pay its debts.
When a bank or mortgage comnpany forecloses on a house, they have to give the owners, in this case the Estate, so your dad gets the paperwork, notice. Then they go to the court and show the judge the note and mortgage, and they get what is called a judgment of foreclosure. That means, the customer signed the note that says, "In trade for this loan, I agree to pay X dolloars a month for so many years, etc . . . " The "mortgage" document simply states that because you gave me the loan, I am backing up my signature and good intentions of paying you back, with my home. I pledge that if I don't pay, you have the right to take the balance I owe you out of the equity in my house. So if your home is worth 80,000 and you are using it to back up a 20,000 loan, then the bank can't just take the home and sell it for 80,000 and pocket the difference. The court sells the home in a foreclosure sale (usually at an attorney's office). The bank will bid only what is owed to them -- the interest, fees, and principal amount that is owed. If someone else comes to buys the house, for say, 30,000, and the bank only bid 20,000 to cover its costs, then the person bought an 80,000 home for 30,000 and got a steal. The bank gets its 20,000 and the Estate would get the remaining 10,000. The bank isn't in business to steal your money, they are just trying to get what is legally due to them to repay the loan.
Often times, if there is not a lot of equity in the house (it wouldn't sell for much more than the mortgage, so the bank won't get fully repaid anyway) you can talk with the bank and deed the property to them to cancel the debt. Then they sell it and you wash your hands of the situation.
If, however, there are other loans also secured by the home, then the bank will have to foreclose to clear out the other liens. (liens are debts secured by the home). When the court does its sale of the property, whatever it gets at the foreclosure sale goes to pay the mortgage holders in order. So if there's a first mortgage, that gets paid, if there's another loan secured by a mortgage to pay for some home improvements, then that gets paid next . . . and so on down the line until the money runs out. So if there is more debt that there is value to the house, someone isn't going to get paid, and the person who buys the house is not held responsible to pay those off because he or she now owns the house.
Every state has different foreclosure laws, so you dad may want to seek some legal advice before making any decisions. And he should definately talk to the bank -- not necessarily the person trying to collect the account, but talk to that person's boss, and go up the chain of command until he finds someone with knowledge and authority who will discuss the situation with him. The more understanding one has of the system, the easier it is to make good decisions.
But it's tough -- especially when someone has died -- because it's your dad's mom (I assume), and he's got to deal with all these details at a time when he's also got his own emotions and his grief to deal with. That is what really complicates the issue. The grief process takes a lot of our brain power away from us. . . You might be able to call the bank -- they will probably not give you specifics, but if you ask them on a hypothetical basis, and provide a scenario, you might get some information about process and possibilities. That's because of the financial privacy laws in our country -- they can't tell you specific information about specific loans, but they can talk process, so that's what you want to ask about. Not about Grandma's loan, but if someone had this kind of loan, and this happened, what would their options be ? And if you were in this situation, knowing what you know as a lender, what would you do ?
With some of these big mortgage companies, it's hard to get through to real people, and to get through to real people who are helpful, but paste a smile on your face, and calm in your heart, and keep smiling and asking questions. Be nice, no matter how hard it is, because nice gets results much faster that supercharged emotive and angry. If you find your are too upset to keep going, set it aside and try again at another time.
I'm sorry about your Grandmom -- and good luck. You are obviously trying to be supportive of your dad as he goes thru this whole process. I'm sure he appreciates your concern and your love.
1 mom found this helpful
M.R. answers from Philadelphia on June 30, 2009
I'm sorry to hear of your loss.
The bank/mortgage company will expect the money to come from whoever inherits your grandmother's property. Is there a will? But yes, one of your family members is responsible for the outstanding balance of the mortgage.
D.S. answers from Allentown on June 30, 2009
Why would you want your Grandmother's house go into foreclosure?
Isn't there anyone in the family who would want to live in the home and pay the mortgage payments?
Just wanted to know. D.
C.H. answers from Allentown on June 29, 2009
the mortgage is in whose name? why not paying the mortgage off unless no money
T.M. answers from Allentown on June 30, 2009
J. , J. ,
my dear ; never let the bank take property .. Ever, never .never ever ......you will spend a lifetime fix'n your world ...... Fight for the roof over your head !!!!!!!
House legally belongs to gram . Gram died . Her monies from life insurance/ cd/ etc will go to the house to ' save' it . Any good lawyer will advise you of this . Why do you want to be ;homeless;?
Gram trusted you to be responsiable to 'pay' the debt and keep a memory alive and create a h-o-m-e- [ smart women]
you and all the heirs to grams 'must' work as a unit . If she has a 'will' .. The house may be going to someone else anyway and /or proceeds divided up among the heirs ...
Get an esq. Real fast !... Save that home with grams money ....save the land /home .......grams worked her entire life for that home ... Do not mess up grams dream.
Good luck. I pray grams has enough monies in her estate to help you transfer the home / sell the home [ cash on hand] / give the home to another responsiable heir .... Save the home ...