Mortgages in Acquisition via Survivorship Affidavit

[Xveckthorn]

Jurisdiction

Ohio

My grandmother wants to leave her house to me when she passes away. Her mortgage company has advised her that I need to take over her mortgage. Unfortunately my credit won't allow for that. If she leaves her real estate to me via Affidavit of Survivorship, am I able to just keep up her mortgage payments after she passes, or do most first lien mortgages have terms that prevent me from making her payments or something? I believe her mortgage is with either Fifth Third or Wells Fargo.

 

[army judge]

If she leaves her real estate to me via Affidavit of Survivorship, am I able to just keep up her mortgage payments after she passes, or do most first lien mortgages have terms that prevent me from making her payments or something?

If the debtor dies owing a balance on a mortgage, the lender can call the note.


Most lenders don't call the note, as long as the note is current.

If the payments stop, trickle in, or get in arrears; lenders rarely will NOT hesitate to call the note.

What is call the note?

Definition. A callable loan gives the bank the right to demand immediate payment in full. ... Calling a loan can be a costly process for the bank, especially if it calls a loan you can't repay. Banks often exercise a call provision as a last resort due to a breach of terms.

https://www.avvo.com/legal-answers/can-the-bank-call-a-note---and-take-our-homes--503295.html

As with most things in life, YMMV.

Even if the bank ignores your granny's demise, allows you to pay the note, you pay the note off in full one day, owning the property can end up being an onerous task.

Unfortunately my credit won't allow for that.

If you have credit problems, paying the note on a mortgage is only part of the story when it comes to BUYING a home.

Notice, I type BUYING, rather than OWNING.

BUYING a home is just another form of debt, debt that most people never get out from under these days.

Based upon your evaluation of your credit, you might simply advise granny as gently as you can, NOT to involve you in her financial affairs because you can't afford to pay the note.

 

[flyingron]

If you inherit the house when she dies, they can not call the loan in almost all gases under Garn--St. Germain Act. Of course, you will have to pay the note on time going forward or they lender can indeed foreclose.

However, you're confused as to how to do the transfer. An affidavit of survivorship by itself doesn't transfer ownership. It's the way of certifying that you have already a survivorship interest and the other owner is now deceased. The term you want is "Transfer on Death Affidavit," which is one way to automatically transfer property on the death of the owner. This is perhaps the best means for your grandmother as it's revocable all the way up to the time of her death.

 

[adjusterjack]

do most first lien mortgages have terms that prevent me from making her payments or something?

Easy to find out by reading her mortgage papers.

I believe her mortgage is with either Fifth Third or Wells Fargo.

Perhaps you should find out which one for sure.

As for the Affidavit, here is the statute. Make sure you read all four sections.

Lawriter - ORC - 5302.22 Transfer on death deed form.

Yeah, it's still called transfer on death deed in the title but is referred to as affidavit in the sections.

 

[Tax Counsel]

My grandmother wants to leave her house to me when she passes away. Her mortgage company has advised her that I need to take over her mortgage. Unfortunately my credit won't allow for that. If she leaves her real estate to me via Affidavit of Survivorship, am I able to just keep up her mortgage payments after she passes, or do most first lien mortgages have terms that prevent me from making her payments or something?

Here is the way it works. Most mortgage contracts have what is called a due on sale or due on transfer clause. This clause says that if the homeowner transfers the property to someone else the lender has the right to call the entire loan due immediately. If the loan is not promptly paid the lender may foreclose on the property to collect.

So when the homeowner dies and the home passes to a beneficiary of the homeowner the lender could elect to trigger the due on transfer provision and call the loan due.

But Congress felt that when the home passes to a family member it was unfair for lenders to trigger those clauses and force the beneficiary to come up with the full loan balance or lose the home if they couldn't raise the money (e.g. didn't have good credit enough to refinance into a mortgage of their own). So as part of the a bill called the Garmin - St. Germain Depository Institutions Act of 1982 it included a provision that prohibits residential mortgage lenders from triggering their due on transfer provisions in certain situations, including when the home transfer is to "a relative resulting from the death of a borrower." 12 U.S.C. § 1701j-3(d)(5).

So if the home passes to you because of your grandmother's death the lender is prohibited by that law from triggering the due on sale clause. This means that as long as you make the mortgage payments on the house on time after she dies you won't have to refinance the mortgage and you won't lose the house to foreclosure.

 

[Xveckthorn]

Thank you! Perfectly explained!

 

[flyingron]

While the ORC AJ posted is correct, be warned while the code sections is called Transfer on Death Form, transfer on death deeds by that name were obsoleted under the law a decade ago. The new form, as I stated, is a transfer on death affidavit (which indeed is what the actual text of the law calls it). If you find a preprinted form that says "deed" you got an old one.