Q: Mortgage co says mortgage from inherited property in Florida from Mom can't be assumed by 4 children, must be refinanced
We understand the Garn St Germaine Act of 1982 protects consumers from having onerous terms put on them when inheriting a mortgage. Our mother had Alzheimer's so I have been making the payments on time every month, never missed a payment. The property, still in probate, will be inherited equally by 4 children. How do I protest this with the mortgage company to assume the mortgage?
A: Requiring the heirs to refinance the mortgage is not placing onerous terms on the heirs. The mortgage company has every right to require someone with a mortgage to meet the financial requirements to hold a mortgage. If you can make the payments, get the mortgage refinanced in your name. You should consult a real.estate attorney.
A: Generally, and specifically the mortgage company is likely wrong. The federal Garn-St. Germain Depository Institutions Act of 1982 prohibits enforcement of a due-on-sale clause after specific kinds of transactions, like a property transfer to a relative upon the borrower’s death or a transfer from a parent to child. (12 U.S.C. § 1701j-3). So, if the property transfer is covered by the Garn-St. Germain Act, you can keep making payments on the loan—and the transfer can’t be the basis for acceleration and foreclosure. You can also assume the loan if you want. The Consumer Financial Protection Bureau (CFPB) issued an interpretive rule that helps an heir assume a deceased borrower’s mortgage after inheriting a home. (In the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress established the CFPB and gave it the authority to adopt new rules to protect consumers in mortgage transactions.) Specifically, after the original borrower dies, the person who inherits the home may be added to the loan as a borrower without triggering the ability-to-repay (ATR) rule. The catch is often that the inheriting person/s relatives must live in the home (The Garn-St. Germain Depository Institutions Act of 1982 gives relatives inheriting a mortgaged home certain rights. If inheriting a mortgaged home from a relative, the beneficiary can keep the mortgage in that relative's name, or assume it. However, relatives inheriting a mortgaged house must live in it if they intend to keep its mortgage in the deceased relative's name. Only related inheritors can keep mortgages in the names of the deceased borrowers). I will note, mortgage company always says it must be refinanced or assumption fee paid, if you inherited it via probate, that simply is not true, fight them on this with the law above brought to their attention. If probate has not been done and home declared homestead or otherwise transferred that also needs to be timely addressed and done.
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