On Deed but Not Mortgage - How to Resolve?

[Bawlin92]

Hello,

Long time lurker but first time poster here. Hoping for some advice from this helpful community on how I can get my mom's name officially on the mortgage of her own house.

For context, ~4.5 years ago my mom and her boyfriend bought a house "together" in his name. They intended to get married, live out their lives in that house, etc. Tragically 5 months later he died of cancer. The man had great intentions but unfortunately didn't have his affairs in order. What ensued was an ugly legal battle between my mom/me and his family. They wanted to leave my mom with nothing, but we had enough leverage against them to secure for her the house and other assets.

The handover of the house wasn't clean. Although the deed was re-issued in her name, the mortgage was never "transferred" over. There's two reasons for that. One is prior to his death his sons changed the passwords on his personal accounts. So she can't access the details of the mortgage online (serviced by Wells), though she may get statements in the mail. The second is she's concerned about qualifying for the mortgage if "transferring" it to her meant she'd have to reapply. The current payment is ~1/3rd of her pre-tax income (she's a K-12 public school teacher), and the payment has gone up over the last 4.5 years as the property value/tax has risen substantially (the house is in a rapidly gentrifying section of Norfolk, VA).

When this all originally took place, she received advice from a personal friend that she shouldn't say anything and just continue making the payments. This way 1) she could stay in the house because the bank won't care as long as the payments are made, and 2) if she did eventually have to reapply a history of continued payments could look good. So that's what she's done since. She makes the payment via phone because she can't access the account. She's never contacted the bank to notify them of his death for fear of triggering a process where she'd have to reapply.

So ultimately the question is how can we get the mortgage in my mom's name and what's that process? Will she have to reapply as if she's a new borrower? Will they take the history of payments (and the circumstances generally) into consideration? Is there a possibility she could get denied? I myself manage some of my mom's other financial affairs, but have never owned a home so this is out of my realm of experience.

TLDR: Mom's name is on deed but not mortgage. Can't access mortgage details. How can we get the mortgage in her name?

Any and all advice is greatly appreciated! Thank you!

[Cassie]

I hope you get some useful information. What a dilemma.

[Michael in ABQ]

There is a fair possibility that the mortgage could be considered in default if the borrower died and the bank was never notified. Ultimately the bank wants their money, not a house. She definitely needs to talk to a real estate attorney. The mortgage is probably filed with the county clerk (or whatever local equivalent records deeds) and can be obtained for free or a nominal cost for printing. She has legal title but the bank still has a lien against the property for the remaining amount of the mortgage. In theory she could go get a new mortgage with a different lender for the remaining balance and use that to pay off Wells Fargo in full. However, the new lender would never issue a second mortgage until the first one released their lien as they would be second in line to get their money.   

If the property taxes are increasing the value of the home has probably increased as well. It's possible that what may have been a mortgage for 80% of the value would now only be say 60%. By paying on it for 4.5 years she's certainly paid down some of the principal, albeit not a lot as the beginning of the loan term is mostly interest. But between that and increasing value she could have a fair amount of equity. For about $400-500 she could get a private appraisal done to determine the current market value.

Bottom line, she needs to get a copy of the deed, the mortgage, and go talk to a real estate attorney. Kicking the can won't work forever and bad news doesn't get better with time.

[Dicey]

Hmmm, someone else posted something similar recently.  @Another Reader had some excellent advice. IIRC, there were other responders, and the general response was there is a lot you can do without lawyering up. I'll poke around and see if I can find the thread.

How much has the house risen in value since they bought it?

[Catbert]

I think there is zero way your mom can get the existing mortgage transferred to her name.  (I assume she's in the US.)  Most (all?) mortgages today are non-assumable.  And, unfortunately, since the mortgage isn't in her name all those on-time mortgage payments are credited to the dead BF, not her.

I would go to a mortgage broker to see if she could qualify for a loan herself.  If not, I'd leave it alone although maybe someone else has a better idea.

[Dicey]

Found it.

https://forum.mrmoneymustache.com/real-estate-and-landlording/advice-needed-regarding-inheriting-a-home/msg2648357/#msg2648357

[Bawlin92]

There is a fair possibility that the mortgage could be considered in default if the borrower died and the bank was never notified. Ultimately the bank wants their money, not a house. She definitely needs to talk to a real estate attorney. The mortgage is probably filed with the county clerk (or whatever local equivalent records deeds) and can be obtained for free or a nominal cost for printing. She has legal title but the bank still has a lien against the property for the remaining amount of the mortgage. In theory she could go get a new mortgage with a different lender for the remaining balance and use that to pay off Wells Fargo in full. However, the new lender would never issue a second mortgage until the first one released their lien as they would be second in line to get their money.   

If the property taxes are increasing the value of the home has probably increased as well. It's possible that what may have been a mortgage for 80% of the value would now only be say 60%. By paying on it for 4.5 years she's certainly paid down some of the principal, albeit not a lot as the beginning of the loan term is mostly interest. But between that and increasing value she could have a fair amount of equity. For about $400-500 she could get a private appraisal done to determine the current market value.

Bottom line, she needs to get a copy of the deed, the mortgage, and go talk to a real estate attorney. Kicking the can won't work forever and bad news doesn't get better with time.

Appreciate the advice. Agree it's time we get a professional involved. Just typing this out for the first time has made me realize how complicated / unconventional this situation is. I've also done a bit of research on due-on-sale clauses and seems like we could really screw things up if we make a wrong move trying to work it out on our own.

Hmmm, someone else posted something similar recently.  @Another Reader had some excellent advice. IIRC, there were other responders, and the general response was there is a lot you can do without lawyering up. I'll poke around and see if I can find the thread.

How much has the house risen in value since they bought it?

Thanks for linking the other thread, will definitely have a look.

According to the county assessor's site the total value has risen ~$50k since the original assessment.

[secondcor521]

So ultimately the question is how can we get the mortgage in my mom's name and what's that process? Will she have to reapply as if she's a new borrower? Will they take the history of payments (and the circumstances generally) into consideration? Is there a possibility she could get denied? I myself manage some of my mom's other financial affairs, but have never owned a home so this is out of my realm of experience.

TLDR: Mom's name is on deed but not mortgage. Can't access mortgage details. How can we get the mortgage in her name?

Any and all advice is greatly appreciated! Thank you!

The process would be that she will have to reapply for a mortgage as though she is a new borrower.  As another poster said, there generally are not assumable / transferable loans these days.

It's essentially a refinance, and she should inform the new mortgage company of the existing mortgage and if she's approved between the new mortgage and the title company they'll make sure that the existing mortgage gets paid off and the lien removed so that the new mortgage can be in first position.

They will look at her credit history, assets, liabilities, income, and job history.  As someone said, since she is not liable for the existing mortgage, those payments won't count towards her credit history.

It is possible that she could get denied for a mortgage if her income is too low or her job history is too spotty or if she owes a lot to others (like credit cards or car loans or whatever).  If that happens, then it may be the case that she can't afford to stay in the house and really should consider moving to more affordable accommodations.  If she does downsize, then she could sell the house and use the proceeds to pay off the existing mortgage - she'd have to anyway in order to sell it because the new owners wouldn't want that existing mortgage in place, even though her name isn't on the mortgage.

...

She probably should come clean and notify the bank that holds the existing mortgage that he is deceased.  They probably won't foreclose on her as long as the payments are made, but they probably can force a refinance or accelerated payoff due to his death, so if she can't pay it off or get it refinanced they probably could foreclose eventually.  I don't know the timing but I would guess they would probably give her on the order of several months to half a year to get things straightened out.

The good news is that mortgage rates now are really very low by historical standards, so since she's just refinancing and already owns the home, it should be as affordable as it's going to get.

[Dicey]

Hmmm, someone else posted something similar recently.  @Another Reader had some excellent advice. IIRC, there were other responders, and the general response was there is a lot you can do without lawyering up. I'll poke around and see if I can find the thread.

How much has the house risen in value since they bought it?

Thanks for linking the other thread, will definitely have a look.

According to the county assessor's site the total value has risen ~$50k since the original assessment.

You're on the right track, but looking in the wrong place. Type her address into Zillow, Redfin, Realtor.com, and whoever else is popular in your area. Use the lowest estimated value for now. I suspect that her LTV (Loan to Value) is pretty good, which will help. Next, if she has records to show she has been making the payments regularly out of her own account, get all that documentation in order. Then she can seek out a local lender or CU. They're more likely to be flexible. Don't offer any more information about the partner except that he is deceased. Let the lender ask the questions and keep the answers on point but no more. This stuff happens in life, they've seen it before. If she's a good credit risk, they're likely to work with her. This is assuming that she can afford the loan, but in this low interest rate climate, she should be okay, especially if her other expenses are low and her credit is decent.

Seriously, we were conducting other business at our bank and mentioned that we were about to buy a rental property. They insisted they wanted to work with us. We humored them and provided our info. They wrote the loan as a second home. WTF? It was a major bank. Since we'll never default on it, we didn't really care. We just figured someone had a quota to make that day.

I repeat, there is no need to lawyer up just yet. Don't seek it unless you need it. You won't know until you start talking with other lenders. They, by the way, are not going to inform the first lender. They're up to their necks in people wanting cheap loans right now and have no motivation to poke their nose into that business unless/until they agree to give her a new loan.

[Bawlin92]

The process would be that she will have to reapply for a mortgage as though she is a new borrower.  As another poster said, there generally are not assumable / transferable loans these days.

It's essentially a refinance, and she should inform the new mortgage company of the existing mortgage and if she's approved between the new mortgage and the title company they'll make sure that the existing mortgage gets paid off and the lien removed so that the new mortgage can be in first position.

They will look at her credit history, assets, liabilities, income, and job history.  As someone said, since she is not liable for the existing mortgage, those payments won't count towards her credit history.

It is possible that she could get denied for a mortgage if her income is too low or her job history is too spotty or if she owes a lot to others (like credit cards or car loans or whatever).  If that happens, then it may be the case that she can't afford to stay in the house and really should consider moving to more affordable accommodations.  If she does downsize, then she could sell the house and use the proceeds to pay off the existing mortgage - she'd have to anyway in order to sell it because the new owners wouldn't want that existing mortgage in place, even though her name isn't on the mortgage.

...

She probably should come clean and notify the bank that holds the existing mortgage that he is deceased.  They probably won't foreclose on her as long as the payments are made, but they probably can force a refinance or accelerated payoff due to his death, so if she can't pay it off or get it refinanced they probably could foreclose eventually.  I don't know the timing but I would guess they would probably give her on the order of several months to half a year to get things straightened out.

The good news is that mortgage rates now are really very low by historical standards, so since she's just refinancing and already owns the home, it should be as affordable as it's going to get.

Yes the consensus seems to be that it's unlikely that the lender will just transfer the mortgage over to her, whether because of the contractual language already in the mortgage, or as a matter of business practice I guess.

I agree with both what you and Dicey have suggested in terms of speaking with other lenders to get a sense of whether she'd qualify for a refi of the current mortgage given her financial status. If we can get her out of this purgatory-like situation, then a refi at a lower rate would be the icing on the cake. I think the fear was if we did that somehow the current lender would find out and take action against her. Seems like that's unlikely though? Assuming she qualifies, it'd be good to have that backstop financing in the event that when we notify the current lender they demand immediate or accelerated repayment.

Long term the plan was always to get her out of the house. It became a game of kicking the can down the road because it was hard to move her after he passed away and the status quo was better than the alternative which seemed likely to be foreclosure. Definitely time to act now though. Appreciate the advice.

Hmmm, someone else posted something similar recently.  @Another Reader had some excellent advice. IIRC, there were other responders, and the general response was there is a lot you can do without lawyering up. I'll poke around and see if I can find the thread.

How much has the house risen in value since they bought it?

Thanks for linking the other thread, will definitely have a look.

According to the county assessor's site the total value has risen ~$50k since the original assessment.

You're on the right track, but looking in the wrong place. Type her address into Zillow, Redfin, Realtor.com, and whoever else is popular in your area. Use the lowest estimated value for now. I suspect that her LTV (Loan to Value) is pretty good, which will help. Next, if she has records to show she has been making the payments regularly out of her own account, get all that documentation in order. Then she can seek out a local lender or CU. They're more likely to be flexible. Don't offer any more information about the partner except that he is deceased. Let the lender ask the questions and keep the answers on point but no more. This stuff happens in life, they've seen it before. If she's a good credit risk, they're likely to work with her. This is assuming that she can afford the loan, but in this low interest rate climate, she should be okay, especially if her other expenses are low and her credit is decent.

Seriously, we were conducting other business at our bank and mentioned that we were about to buy a rental property. They insisted they wanted to work with us. We humored them and provided our info. They wrote the loan as a second home. WTF? It was a major bank. Since we'll never default on it, we didn't really care. We just figured someone had a quota to make that day.

I repeat, there is no need to lawyer up just yet. Don't seek it unless you need it. You won't know until you start talking with other lenders. They, by the way, are not going to inform the first lender. They're up to their necks in people wanting cheap loans right now and have no motivation to poke their nose into that business unless/until they agree to give her a new loan.

Thanks again. We'll be reaching out to other lenders, and will take your advice on sticking to the facts and let them ask the questions. I think she's a good credit risk (stable employment, low debt, reasonable LTV, good credit history) but we'll see.

I think we may still contact a lawyer at least for some initial advice on how to proceed. I looked at the deed history and I forgot that it was transferred from the deceased to his sons then to her (like I said in the OP they were really trying to screw her over). That just muddies the waters a bit more. I requested the deed and mortgage documentation from the county clerk; I'll see if that turns up anything else before making a decision on a lawyer.

[Bawlin92]

Posting a follow-up in case anyone ever comes across this and would find it helpful to know how it was ultimately resolved. The next step we took was to contact a few local real estate attorneys however they were mostly unhelpful in providing concrete advice on how to proceed. So we went ahead and put out refi applications with a few local banks / credit unions and one national mortgage lender. We were able to provide the necessary documentation around employment, assets, etc. When asked for documentation for the existing mortgage we explained the situation in the OP. Surprisingly all loan officers were understanding of the situation and were willing to skip over the need for that documentation provided we provide accurate #s on the original origination date, rate, balance, monthly payment, etc. The lender we ultimately decided to go with just needed the Wells Fargo loan # and was able to take care of the rest. As far as we know they never contacted Wells Fargo until after closing / disbursement so there was no concern about the loan getting called. As we got closer to closing there was some work required to get the homeowner's and flood insurance solely in my mom's name. But since we decided to stay with the same providers they just re-papered the existing policies in her name. We successfully closed on the loan in late December. Given where rates could be headed I don't think we could've timed it much better. It worked out quite well.

After the closing we did finally contact Wells Fargo for the purpose of getting the leftover escrow check sent to the right address and correctly made out to my mom. There was a bit of a run around but eventually got in touch with the "life events" customer service group, explained the situation, and they took care of it. At that point the refinance had already closed so there wasn't much of a reason for them to care about the status of the previous mortgage. So hard to say what their response might've been if we had contacted them prior and informed them of the death of the borrower. All in all we're very pleased with how things shaped up and the peace of mind of having everything squared away in my mom's name is great. Thanks again to those who provided advice in this thread.

[MaybeBabyMustache]

This sounds so complicated, so I'm really happy it was resolved for your mom!

[Dicey]

Your mom must be so relieved! Good for you for helping her through this maze. Thanks for the follow-up.

In my experience, homeowner's insurance companies tend not to reward long term customers, instead they take advantage of inertia and keep steady upward pressure on the rates. This might be a good time to get a few price quotes to make sure she's paying competitive rates.