Death by Foreclosure

What Happens In and Or To A Foreclosure Action If A Party Defendant Passes Away

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Is it falling home values? A general economic depression? Personal factors like divorce or death? The number one reason for foreclosure differs by state and region, but we can take a look at some of the current economic theories for the distressed housing market.

How to Deal With a Foreclosure as an Estate Executor

Next we'll see what role subprime mortgages play. Can you buy your first home with bad credit? Many people are losing their homes to foreclosure.

See more real estate pictures. If you took out a mortgage protection insurance policy, that would automatically pay off any balance.

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The exception to the rule would be if you know your heirs cannot afford the payments or qualify for a refinancing. If the mortgage is too much for your heirs to handle, they can sell the home or, in the most extreme case, simply walk away. In instances where the loan is underwater — when the home is worth less than the balance on the mortgage — walking away might be the wisest move.

Otherwise — say, if there's a sentimental attachment to the home and heirs want to keep it — "then you have to try to get together with the lender and see if you can work something out," Ebby says. You can start by asking the lender to forgive some of the debt, Donnelly says. But that almost never happens. Lenders are far more likely to accept a short sale that allows your heirs to sell the property for less than the outstanding debt, with the bank agreeing not to hold your estate liable for the loss.

If your heirs simply stop making the monthly payments and your home falls into foreclosure, the lender could sue your estate to recoup its losses.

What the foreclosure process in the event of the death of the mortgagee ?

This is another matter entirely. A reverse mortgage is a lien on the home. If there is no co-borrower — or the co-borrower is also dead or no longer living in the home — the loan comes due when the borrower dies. The heirs will only inherit the home itself if the reverse mortgage balance can be paid off without selling the property.

To accomplish that, your heirs would have to pay off the balance with cash from the estate or another source, or take out a new loan. The more likely outcome is that your heirs will inherit whatever equity is left after the home is sold and the lender repaid. In another case, through a newspaper article reporting the fire of the property and the death of its owners.

If the property is held solely by the decedent or if the property is held as tenants in common then we run into a substitution of estate issues. The general rule is that death of a party divests the court of jurisdiction until such time as a representative of the estate is substituted. The proper party would be served with the action and be afforded all the procedural safeguards mandated by due process. If a person, who should be substituted, does not voluntarily appear in the Supreme Court action, mortgagees must petition the Surrogate to appoint the public administrator as representative of the estate.

Lastly, just because the decedent has only one heir or names an heir in an unfiled will, it does not mean that party is the estate representative unless and until they are appointed as such by a court. Effectively, the general rule means that you cannot bring an action against an estate, but only upon appointment of an estate representative, and their substitution in place and stead of the decedent, can an action be commenced, or a prior action was commenced, could proceed.

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Alternatively and luckily , if a Judgment of Foreclosure and Sale has been granted prior to the death of the party defendant, no substitution of the estate is required. The Judgment has full force and effect, can be executed and binds all persons claiming any interest under the mortgagor. So, what happens to a foreclosure action when a party defendant passes away?

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