16 Dec The Homeowner Survivor Bill of Rights – What You Need to Know
After being signed into law by Governor Jerry Brown on September 29, 2016, the Homeowner Survivor Bill of Rights is all set to be in effect from January 2017 onwards.
What is it?
The Bill is meant to protect widows, widowers, and legal heirs from foreclosure of the property owned by the deceased. Until recently, if someone died while there was still a mortgage on the house he/she lived in, the lender could refuse to see the mortgage through, citing that the home legally belongs to them in the case of a default on the mortgage payment. With the original homeowner having died and unable to make any more payments, a ‘default’ situation would indeed arise and they had the legal right to foreclose on the property.
Consider the example of a man who took out a $80,000 mortgage on his home in 2004. The mortgage was for a period of 15 years, and he has been regularly making the payments – up until his death in 2016. By then, he would have paid more than $68,000. The bank is still owed another $17,000 including interest, but for them it is financially more profitable to forego this amount and foreclose on the property, which has risen in value to $100,000.
That would mean they get $100,000 (and this is after they received $68,000 from the borrower) by putting it on the market. So, by lending $80,000, they make $168,000 over 12 years. Even if the remaining debt of $17,000 is considered, the financier would still have $151,000 in their books at the end of the day. This translates to a net return of 88%, or roughly 15% per year – which is more than the 6.5% they initially hoped to earn by having the borrower make his payments on time.
Now you see why widows, widowers and heirs get a raw deal from the lenders, even if they are willing to make good on the payment that is legally owed to the mortgage company.
A lot of widows, widowers, and heirs have lived and/or grown up in the same homes that they now stand to lose. The Homeowner Survivor Bill of Rights – Senate Bill 1150, which was introduced by San Francisco Senator Mark Leno and co-authored by Stockton Senator Cathleen Galgiani, – lays down a set of stringent criteria to ensure that financiers do not foreclose on these homes unnecessarily.
Widows, widowers, and heirs can now continue to live in the homes which contain the memories of their beloved ones.
What does it say?
Mortgage companies cannot immediately declare a ‘default’ on the mortgage in the event of the deceased not making payments.
- The law says that survivors of the deceased have to formally inform the mortgage company of the death of the homeowner.
- Upon being informed of the homeowner’s death, it is the mortgage company’s responsibility to officially request the necessary documentation regarding the death from the next of kin, and also how the property is to be divided up.
- The survivor(s) of the deceased have 30 days after they receive this request to submit the death certificate, or other reasonable evidence/documentation pertaining to the death of the homeowner.
- 90 days may be given for the legal heirs / survivors to furnish the documents pertaining to inheritance. The mortgage company is legally mandated to work with those who have an interest in the property to modify the loan accordingly.
- If the deceased person left behind a will, the mortgaged property passes on the person(s) named and it is him/her/they who has the responsibility of clearing the debt owed to the mortgage company by the deceased.
- If the deceased person died intestate, or without a will, California law applies and the legal heirs of the deceased are to be found and personally contacted by the mortgage company. It may happen that some have no interest in the property. In such a case, the mortgage company is to work with those who have expressed interest in the property to clear the lien on the property. When the debt has been repaid in full, it is to these persons that the property will revert back to.
- The mortgage company has to provide a single point of contact to the family of the deceased.
The law is scheduled to run until January 1, 2020.
But as these lending companies have always done, they can always deny receipt of any communication regarding the borrower’s death, so that they can proceed to recording the mortgage as in a state of ‘default’. Those who have tried to keep their homes have found themselves in this situation.
Therefore it makes sense to have an attorney in your corner so that he/she can do the needful while you do what you need to do – grieve over the death of your beloved. A property lawyer who is well-versed in California state laws regarding inheritance can also help in case there are multiple claimants to the home you live in.
And as others have found out painfully, sometimes the mortgage companies raise the adjustable rate mortgage to such a high level that the survivors / legal heirs cannot afford to pay. This would help them to foreclose on the home. A lawyer can help in the event of mortgage companies resorting to such arm-twisting tactics to take away your home.
Contact Romel Ambarchyan at RA & Associates at 1-888-280-1344 or firstname.lastname@example.org for assistance regarding keeping your home through the Homeowner Survivor Bill of Rights or any other foreclosure assistance.
RA & Associates
505 N. Brand Blvd.
Glendale, CA 91203
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