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What Happens to a Mortgage after
the Death of the Homeowner
The
loss of a family member is difficult but it is often made
even harder if they had a mortgage. This event can put a lot
of stress on the family after the death of a loved one or
their parents. Many people believe that debts die with the
person, but this is only true if the individual does not have
any assets. If they do have assets then the heirs are often
held responsible for paying their debt.
Upon
the death of the mortgagor, the loan balance, which consists
of payments made to you or on your behalf plus the accrued
interest, will become due and payable. The heirs may repay
the loan balance by selling the home or they may pay off the
mortgage and keep the home.
Texas
is a trust state. This means that once a death occurs, the
representative of the mortgagor is given the responsibility
to publish a notice to creditors and set a time period for
filing claims. A foreclosure cannot occur unless the trustee
first files a claim with the Probate Court in the appropriate
county. The claim must include a copy of the deed and the
note. There is a ten-year statute of limitations for enforcing
liens against the property and this must be played out until
the full administration of the estate or the distribution
of the property has been completed. Once this occurs, the
foreclosure process is able to proceed as if the mortgagor
were alive.
According
to Texas law, the administration of the estate is opened within
four years of the death. During this time the Probate Court
is not allowed to impede the process of a sale. The state
has created four separate scenarios that affect foreclosure
in Texas.
1.
When the will is probated and an independent executor is appointed
a foreclosure sale can be deemed value if the executor is
notified. In this scenario the notification of the executor
is the only extra step that the mortgage company must take.
2.
If the sale is held during the pending of the dependent administration
the sale is valid if an Order of the Probate Court is obtained
allowing the sale.
3.
If there is not an administration then any sale held within
the four years after the death of the mortgagor may be voided
if an interested party comes forth and sets the sale aside
within that four-year period.
4.
When
the four years have elapsed and there is no administration
for the property then any sale that is held is deemed valid.
There
are delays in Texas due to the four-year period. During this
time, there may also be additional costs and risks that are
associated with property if it is allowed to be damaged or
depreciate.
During
the sale stage of the foreclosure process, the heirs and interested
parties must be named in the published notice. There are no
laws requiring that these individuals be served with a notice,
but it is appropriate to do so. These parties are able to
assert the same rights of redemption in the Deed of Trust.
If the mortgagor had chosen to waive his rights of redemption,
then the waiver will also bind the heirs and interested parties.
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