Q: Is probate required in Oregon to take ownership of my deceased mother's house before it is foreclosed on?
When my mother passed away without a will, she was in bankruptcy and trying to avoid foreclosure. The bankruptcy has just been discharged, but the house wasn't in it so it is still subject to foreclosure. I want to keep the house & assume the loan, and have submitted documents establishing my identity as her heir, as well as a request to modify the loan. However, probate has not been started and the deed hasn't been transferred to me. Is probate required for me to become the successor in interest to the house? I'm concerned even the Oregon small estate probate will take too long before they try to sell the home. I'm disabled and there are no funds in the estate to hire anyone to help. Thank you.
A: Once a mortgage is delinquent all sorts of additional charges get added on including Attorney's Fees and usually the only way to save the property is to pay all the past due amounts in one sum. If you don't have money to hire an attorney you probably don't have money to catch up the mortgage. You could try to sell the house and salvage the equity and pay off the mortgage. There is a way to do this without a probate but not all Attorneys are familiar with how to do a non-probate sale of real estate, but it can be done.
You probably need a foreclosure/bankruptcy attorney's guidance, to assess the overall situation. The first thing to do is determine how much time you have absent any action on your part. You may have more time than you think or the lender may schedule a foreclosure sale at any moment. You should contact the foreclosing law firm and/or sherriff (if it is a judicial foreclosure) or the foreclosure trustee if it is a nonjudicial foreclosure. If you do in fact potentially qualify to get on title and to be reviewed for a loan modification they may be fairly generous in letting you try to do that before they foreclose. Their probate related cases tend to take longer anyway (in judicial foreclosure cases at least) as they have extra paperwork related to the situation as well. But if you determine you want to proceed you should plow forward with the probate case so that that is ultimately in place since that will need to be done before you can get on title and get a loan modification.
You yourself are now entitled to file a chapter 13 that would stop the foreclosure sale (even before you are on title) by virtue of the fact that you now have an interest in the property. If there is no equity in the home you may get little benefit from filing chapter 13, but if there is equity in the home you have essentially one of three options in a chapter 13.
1. show that you can start making the regular monthly payment immediately and that you catch up the current arrearage over a 60 month period.
2. propose a chapter 13 plan that gives you 6 months to get a loan modification while not making any payments on the loan. If you can show the bankruptcy judge that you are proceeding forward with the probate process and that the lender is willing to review you for a loan modification the bankruptcy judges generally allow 6 months to see if that is successful. It generally ends up creating a bit more than 6 months because after the 6 months is up the lender still has to jumpstart and complete the foreclosure.
3. Show that there is equity in the home and propose a chapter 13 plan in which you begin immediately making the ongoing mortgage payment and propse to sell or refinance the home in 24 months from the date the chapter 13 plan is confirmed.
All three of the above chapter 13 plan options are very common and acceptable. If you can afford to make the ongoing mortgage payments number 3 actually allows you to do any of the 4 options within 24 months (i.e. get a loan modification, catch up the arrears, sell the home or refinance the home).
there may also be options to eliminate the 4 month notice/waiting period on a small estate proceeding by providing affidavits from other interested parties that they do not object to your being put on title, but you should discuss this with a probate attorney.
I agree with my colleagues and would add the following in order to directly answer your question: No, you do not need to probate your mother's will in order to become the successor in interest. Under California law, lenders must provide heirs with information about the loan and must allow the heirs the right to seek a loan assumption and modification, if needed. The law provides a private right of action against lenders and servicers that violate the law, including post-foreclosure remedies of $50,000 or treble actual damages.
That doesn't mean you can sit back and do nothing, however. It only means that you have standing to have a conversation with the lender. They can't hang up on you because you are "not the borrower". If the loan is already in the process of foreclosure, you need to bring it current quickly or, as suggested by my colleagues, seek other remedies such as bankruptcy or loan modification. If you can't bring the loan current and you can't afford to hire an attorney for start a bankruptcy then you need to contact the lender as soon as possible, remind them that you have already provided paperwork showing that you are the successor in interest, and ask for a loan modification application.
If the loan is owned or guaranteed by Fannie Mae, as most residential loans are, the lender is bound by this rule: “[If the] new property owner is unable to bring the mortgage loan current but may be able to resolve the delinquency with a foreclosure prevention alternative . . . and assume the mortgage loan, the servicer must [allow the new owner to apply for a foreclosure alternative] and evaluate the request as if they were a borrower.”
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