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.
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).
Under California law, the following relationships to a deceased borrower qualify as a successor in interest:
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.
Under the law, successors in interest get:
This California successor-in-interest law will sunset January 1, 2020, unless extended.
Federal law also provides protections for heirs and others.
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:
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.
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 full loan balance will be accelerated.
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.
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.