When a loved one who holds a mortgage passes away, it can be an emotionally difficult time. However, it is important to notify the mortgage company of the death in a timely manner to avoid complications with the loan. Here is some guidance on when and how to inform the mortgage company after someone’s passing.
Notify Within 30 Days of Death
Most mortgage experts recommend notifying the mortgage lender as soon as possible and within 30 days of the death. The mortgage contract will have specific clauses about notification requirements, but generally within 30 days is considered prudent.
Some reasons to notify the lender within 30 days include:
- The mortgage company can put a hold on automated payment withdrawals from the deceased’s bank account to avoid missed payments. This hold is usually temporary until estate matters are handled.
- It allows the mortgage servicer to update their records and work with the estate executor on next steps. This can avoid unnecessary penalties or fees.
- Prompt notification demonstrates good faith to the lender that the estate intends to handle the outstanding loan appropriately.
- It starts the clock on any deadlines the lender has to request payment of the full loan balance if there is no co-signer.
Bottom line, the sooner you inform them of the death, the more flexibility you and the executor may have in dealing with the mortgage.
How to Notify the Mortgage Company
To notify the mortgage servicer of the death, you will need to send certain documents and identification:
- A copy of the death certificate.
- The loan account number.
- Contact information for the executor or personal representative of the deceased’s estate.
- Your identification and relation to the deceased.
Many lenders have a specific form or online process to report a death. Contact their customer service department or check their website for details. Generally, you can notify them by:
- Phone – Call customer service and ask for the appropriate department.
- Mail – Send a letter with the documentation to the lender’s address.
- Online – Use the lender’s online document submission process if available.
- In-person – Visit a branch location if you prefer to notify them in person.
When you contact the mortgage servicer, be ready to provide:
- The deceased’s full name and date of death.
- Loan account details like account number, property address, loan balance, etc.
- Executor’s name, address, phone number and email.
- A phone number and address where you can be reached as the contact person.
Notify any co-signers or business partners related to the mortgage as well. Provide the lender with as much information up front as you can about the situation to make the process easier.
What Happens After Notifying the Lender
Once the servicer is informed of the death, here are some next steps that typically occur:
- Payments on hold – The lender will put automated payments on hold pending further estate action.
- Communication with executor – The servicer will contact the executor regarding the mortgage and any outstanding balance.
- Request for payment – Within 30-60 days, the lender may request full payment of the loan balance if there are no other liable parties.
- Foreclosure process – If the executor cannot pay off the balance, the servicer may initiate foreclosure after about 6 months.
- Loan assumption – An heir or the estate may be able to assume the mortgage and continue making payments if qualified.
- Loan modification – The executor can potentially refinance or modify the loan by working with the servicer.
The exact timeline and requirements will depend on the mortgage lender and type of loan. The executor should be prepared to communicate frequently with the servicer to arrange the payoff or transfer of the loan in the coming months.
Special Circumstances
Certain situations can affect the mortgage notification process and next steps:
- Joint mortgage – If there is a surviving co-borrower on the loan, they will continue making payments as normal in most cases.
- FHA loan – For FHA loans, the notification period is within 60 days and co-signers have up to 90 days to assume the mortgage.
- VA loan – A VA guaranteed loan may be assumable by a qualified co-signer or heir of the deceased veteran in some cases.
- Reverse mortgage – Special rules apply for reverse mortgages, and non-borrowing spouses may be able to continue occupying the home.
- Delinquent payments – If payments are delinquent before death, the servicer may demand faster payoff of the balance.
Consult the lender directly if the deceased had a non-standard mortgage or was already behind on payments.
Hardship Options
If the estate cannot pay off the balance quickly, the executor or heirs have a few options to potentially stay in the home:
- Apply for mortgage assistance programs like mortgage relief funds.
- Request a repayment plan, forbearance, or loan modification from the lender.
- Propose a short sale of the property to settle the mortgage debt.
- List the home for a quick sale using the proceeds to pay off the mortgage.
- Obtain an emergency loan using the home as collateral to settle with the servicer.
In some cases, refinancing the mortgage may also be possible if the heir is on the title. Work closely with the lender to discuss hardship accommodations if needed.
Tips for a Smooth Process
Here are some tips for making the mortgage notification and follow-up process smoother:
- Act promptly to notify the lender within 30 days of passing.
- Ask the lender if they have a specific death notification form or process.
- Work with an estate planning attorney to handle probate and the lender dealings.
- Keep thorough documentation of all communication with the servicer.
- Stay organized with all account details, paperwork, and loan information handy.
- Get the required death certificates – lenders usually need multiple original copies.
- Do not delay if the servicer requests a payoff of the balance.
- Keep an open and honest dialogue with the lender about the estate’s circumstances and limitations.
- Ask the lender to provide written documentation of any significant agreements or decisions.
Carefully managing the loan notification and resolution process can help protect property and equity rights after someone passes away.
The Mortgage Resolution Process After Death Notification
Here is an overview of the typical mortgage resolution process after notifying the lender of a death:
| Time Frame | Stage | Description |
|---|---|---|
| Within 30 days | Initial notification | Inform lender of death with documentation like the death certificate. |
| 30-45 days | Payment hold | Lender suspends automated payments from the deceased’s bank account. |
| 45-60 days | Account review | Lender reviews the loan terms, co-signers, and whether the loan can be assumed or not. |
| 60-90 days | Balance payment requested | If no co-signer, lender requests the estate pay the full balance of the loan. |
| 90-180 days | Repayment negotiation | Estate negotiates with lender on options like loan assumption, payoff plans, or loan modifications. |
| 6 months + | Foreclosure proceedings | If balance cannot be paid, lender may begin foreclosure process on the property. |
Time frames vary by mortgage lender but this represents the standard resolution process after a death notice. The estate executor should work proactively with the servicer to settle the loan or determine alternative options like refinancing or assumption.
Key Takeaways
- Notify the lender within 30 days of death.
- Provide documentation like a death certificate and executor contact.
- The lender will suspend payments temporarily after notification.
- If no co-signer, expect the lender to request balance payoff within 90 days.
- Work with the lender on options like loan assumption or modification.
- Foreclosure is possible if the estate cannot settle the balance after about 6 months.
Understanding the standard mortgage resolution process can help executors and families handle the loan appropriately after a death.
Conclusion
The passing of a loved one is difficult enough without having to immediately pay off their remaining mortgage balance. Notifying the lender promptly of the death and working diligently with them on repayment or assumption options are key to resolving the loan properly. Given the complexities that can arise, consulting a legal or financial professional is highly recommended. With time, full communication, and pragmatic planning, the deceased’s mortgage can successfully be put to rest along with their memory.