Home Equity Loan on Inherited House...

[NickPDX]

What is the name of your state (only U.S. law)? Oregon

I am not certain if this would be better served in this forum or in the will/trust forum. Either way I thought I would try here first.

My father past away 3 years ago. It was sudden and unexpected and thus he did not have a will. We went through all of the proceedings with a lawyer "helping us" through it all. Our experience with him didn't leave the best taste in our mouths for sure. Either way when it was all said and done everything was split between my two sisters and me. There wasn't a lot to split, his house being the main asset he had. With the home came a single mortgage and we found a loan that he had taken out with another bank as a "home equity line" of credit. We have never signed anything taking ownership of any loans. Usually they give me a hard time when I go in to pay saying that it isn't mine ... I generally win by saying do you want your money or not. The mortgage has always been paid on time but the equity line has been hit or miss. At this point I am wondering if we are legally obligated to pay the equity line of credit off. Currently it is at ~$18,000 left to pay. If we do decide to try to not pay it are we putting the house in jeopardy? We don't want to lose the house and ~$18,000 isn't enough to give up the house but it would sure be nice to not have to pay it. If repaying it is not an option ... does anybody have any advice on trying to get them to settle to get it paid off for less?

Hopefully that was clear and had the proper information. I really appreciate any advice and knowledge anybody can share with us!

 

[Zigner]

Quite frankly, you have failed to follow the law as it relates to probate.

 

[NickPDX]

Thank you for the response ... but that means nothing to me. If you were trying to help in any way which I would love ... please explain.

 

[ecmst12]

You need to have the house, and the loans, put into your name. Yes, you will need to pay off or assume responsibility for the 2nd mortgage as well, if you wish to keep the house. Whatever lawyer you had helping you out did not finish the job - was he an experienced probate attorney? You probably should get one of those.

 

[NickPDX]

The title of the house has been transferred to our names just nothing was done with the loans. The advice and assumption at the time was that if the payments were made the banks wouldn't care who made them. Is there any difference between a 2nd mortgage and an equity line of credit? We did have an experienced probate attorney back at that time as well.

 

[ecmst12]

That's not really how it works. Most loans become due on the transfer of the collateral. You need to refinance the home and the line of credit into your own name.

 

[NickPDX]

First off thanks for the advice .... that is exactly what I was wanting. So, since it is apparent that my situation is not setup now it should be. Can anybody help me with my other question from the first post:

"does anybody have any advice on trying to get them to settle to get it paid off for less?" Does anybody have experience settling debt like this for less than originally owed? Tactics, procedures, ect?

 

[tranquility]

I can't see how the bank would settle for less if they have security on the house. If they can get all their money from the house sale, they have no incentive to get less.

If they don't have security on the house, they can get paid through many methods. See:
http://www.osbar.org/!newsletters/814/2009/Est_2009Jan.pdf

While I've heard of people doing how you are when a property is in a trust, I don't see how it could work with an actual change of ownership through probate. I'd clarify the situation with the probate attorney.

 

[anteater]

That's not really how it works. Most loans become due on the transfer of the collateral. You need to refinance the home and the line of credit into your own name.

That is not the case for "... a transfer to a relative resulting from the death of a borrower."

12 USC § 1701j–3 - Preemption of due-on-sale prohibitions

http://www.law.cornell.edu/uscode/text/12/1701j-3

 

[tranquility]

That is not the case for "... a transfer to a relative resulting from the death of a borrower."

12 USC § 1701j–3 - Preemption of due-on-sale prohibitions

http://www.law.cornell.edu/uscode/text/12/1701j-3

I agree. The OP is related.

 

[Ivory Ghost]

"does anybody have any advice on trying to get them to settle to get it paid off for less?" Does anybody have experience settling debt like this for less than originally owed? Tactics, procedures, ect?

You can ask the mortgage holder to settle, but frankly it depends on the value of the property. When you ask to settle they will have the property appraised. If the current market value is above the value of the first plus their mortgage and foreclosure costs they will probably not be willing to settle since they can clear enough to avoid a loss.