Taking Over a Mortgage in California When Your Loved One Dies

If you inherit property after a loved one dies, California law ensures that you're able to get mortgage information from the loan servicer, and gives you the right to seek a loan assumption or modification, if necessary.

Federal law also provides protections against foreclosure for heirs after a borrower's death, as well as after transfers that arise through divorce and certain other situations.

California's Successor-in-Interest Law

In California, if you're legally considered a "successor in interest," you get specific rights—like the right to receive information about a mortgage loan and protections against foreclosure—even if you weren't a party to the original loan contract. (Ca. Civil Code § 2920.7).

Who Qualifies as a Successor in Interest?

Under California law, the following relationships to a deceased borrower qualify as a successor in interest:

• spouse
• domestic partner
• parents
• grandparents
• adult children
• adult grandchildren
• adult siblings, or
• joint tenant of the deceased borrower.

Additional qualifications. To qualify as a successor in interest, you must have lived in the subject property for the six months before the borrower's death and currently live in the home. Also, the subject mortgage must be a first-lien mortgage or deed of trust, the property must have been the principal residence of the deceased borrower, and the dwelling can't have more than four dwelling units.

How to prove you're a successor in interest. After telling the servicer about the borrower's death, you get 30 days to provide a death certificate to the servicer. You also get 90 days to show documentation that proves your relationship to the deceased borrower and proof of occupancy.

Basic Rights Under California's Successor in Interest Law

Under the law, successors in interest get:

• The right to receive information about the loan. Once the servicer confirms that you're a successor in interest, it gets ten days to give you a letter with certain information about the loan, including the balance, interest rate and any reset dates/amounts, balloon payments (if any), prepayment penalties (if any), default or delinquency status, the monthly payment amount, and payoff amount.
• The right to potentially assume (take over) the mortgage. All successors in California have a right to apply for an assumption of the loan, as long as the loan is assumable. The servicer may evaluate your creditworthiness, including your credit scores, when considering you for an assumption.
• Protections against foreclosure. If you tell the servicer that you're a successor in interest before it records a notice of default, which is the first step in a California nonjudicial foreclosure, the foreclosure can't start while the servicer confirms your successor in interest status. (You'll need to provide a death certificate and proof of your relationship and occupancy before the 30-day and 90-day deadlines though.)
• The right to apply for a foreclosure prevention alternative. You may submit an application for a foreclosure prevention alternative, like a loan modification, and the foreclosure can't go forward until the servicer evaluates your application.
• The right to sue. If the servicer violates the law, you may sue for an injunction to stop the foreclosure sale. If the servicer or lender violates the law by conducting a sale and records a trustee's deed upon sale, you may sue for economic damages and attorneys' fees, as well as potentially the greater of treble actual damages or $50,000 if the violation was intentional or reckless. This right is similar to the private right to sue found in California's Homeowner Bill of Rights. Be aware that if the servicer complies with the Consumer Financial Protection Bureau regulations—see below—the servicer is considered to be acting in compliance with California law.

When the Law Expires

This California successor-in-interest law will sunset January 1, 2020, unless extended.

Federal Protections for Heirs and Others

Federal law also provides protections for heirs and others.

Consumer Financial Protection Bureau (CFPB) Rules

As of April 19, 2018, a Consumer Financial Protection Bureau (CFPB) rule requires servicers to treat family members, heirs, or other parties—also known as "successors in interest"—who have a legal interest in the home as though they are borrowers on the loan.

Successors in interest under federal law include someone who receives property:

• upon the death of a relative or joint tenant
• as a result of a divorce or legal separation
• through certain trusts, or
• from a spouse or parent.

Under the rule, the servicer must have procedures in place to promptly identify who qualifies as a successor in interest. Confirmed successors in interest are then entitled to receive information about the account and may apply for loss mitigation. Also, under a separate 2014 rule, someone who inherits the home may be added to the mortgage as an obligor (a borrower) without triggering the Ability-to-Repay rule.

Successors in interest are also entitled to foreclosure protections under federal law. If you, as a successor in interest, submit a complete application for a foreclosure prevention option to the servicer, the foreclosure may not start—or proceed to judgment or sale—while the application is pending. But the foreclosure won't pause while the servicer verifies that you're really the borrower's successor.

Garn-St. Germain Depository Institutions Act of 1982

Mortgages and deeds of trust often have what's called a "due-on-sale" clause, which says that if the property is transferred to a new owner, then the lender may accelerate the full loan balance.

However, the federal Garn-St. Germain Depository Institutions Act of 1982 prohibits the lender from calling the loan due under a due-on-sale clause after some transactions, like a transfer to a relative upon the borrower's death.

Getting Help

If you want to take over a mortgage after a loved one dies or otherwise transfers property to you, but find yourself having trouble communicating with a servicer and facing a potential foreclosure, consider talking to a local attorney who can advise you about your rights and help you resolve the situation.