Q: Revocable trust, can beneficiaries continue making mortgage payments as is, or must they refinance?

A: If the Settlor (person who set up the trust) has passed away and, through the trust, has given his/her/their children a home, the mortgage company is almost certainly going to insist the children (if 18 or older) enter into a new mortgage agreement with a co-signer -- simply because most young folks don't earn enough money to be able to pay a mortgage. Mortgage companies need to know there is a person or people on the hook that have sufficient earning capacity to pay the mortgage debt. Also, people under age 18 are minors, so any contract into which they enter can be voided because minors don't have legal capacity. The law assumes minors don't fully understand what they are signing, so they can't be bound by the terms in the contract. Other alternatives to getting a new loan: (1) The trustee can pay off the mortgage if there are sufficient assets to do so AND the trust instructs the trustee to pay off the mortgage; or (2) the home can be sold and the money used to pay cash for a condo or some other home. But the trust needs to instruct the trustee on what can and cannot be done.

A: Most mortgage loan agreements have a clause that requires the home to be refinanced upon the death of the borrower. However, as a practical matter, the mortgage company may not find out about the borrower's death for a while. If you suspect that you may pass before the beneficiaries reach the age of majority, I would highly recommend that you consult with a seasoned estate planning attorney who can craft your estate plan to address this situation.

A: Federal law prohibits enforcement of a due-on-sale clause when a borrower dies leaving a home to a child of the borrower. This law is called the Garn-St. Germain Act. Accordingly, most likely the lender cannot require the successor trustee or the child to refinance. But, of course, the lender can foreclose if payments are not made.

Also, the Real Estate Settlement Procedures Act (RESPA) obligates loan servicers to communicate with successors in interest. The servicer cannot stonewall the successor trustee with the old standby "you aren't my borrower." That had been a huge problem in the past. File a complaint with the Consumer Financial Protection Bureau if the servicer refuses to communicate with the successor trustee and/or refuses to provide loan information to the successor trustee.

Finally, even greater protections are provided under the Homeowner Survivor Bill of Rights (SBOR), California Civil Code 2920.7.

If this lender tries to foreclose the loan even after you have provided the lender with information about the death and the successor in interest, you should contact a consumer protection attorney for assistance. The California law provides a private right of action to sue for treble actual damages or statutory damages of $50,000 for violations of the law if the violation was intentional, reckless, or resulted from willful misconduct.