Generally, heirs have two options. Which option is best – depends on a number of factors, including whether there is any equity in the home, the financial and income situation of the heirs, and whether the heirs who have an ownership interest can agree on what option to pursue.

Option #1
Sell the home. This option can be exercised where the outstanding mortgage is less than the value of the home. Heirs may decide to do this if it is not economically feasible to keep the home.

Option #2
Keep the home. The heirs can decide to keep the home if it is financially feasible to do so. Heirs have a right to continue to “stay and pay.” However, if the mortgage is in default, the heirs who wish to continue living in the property may want to apply for a loan modification from the lender to bring the loan current. Alternatively, they can try to obtain a new loan to pay off the existing mortgage.

Federal regulations require that the mortgage servicer provides you with information on how to qualify as a “successor in interest.” A successor in interest is someone, other than the original mortgage borrower, who has an ownership interest in the property. Once you have informed the mortgage servicer of the property owner’s death in writing, the servicer must promptly communicate in writing to explain how the heir can confirm their “successor in interest” status.

Should you need information about the loan in order to determine your options, it is recommended that you write a letter to the servicer that includes the following information:

• A request that the lender explain what type of documentation is needed to confirm that you are a successor in interest
• Your relationship to the deceased homeowner and borrower
• Deceased borrower’s name
• Property address and loan number (loan number is provided on the monthly mortgage statements)

The lender can require that you provide documentation showing that you have an ownership interest in the property, either as an heir or through an intra-family transfer. Examples of such documents might include a copy of the executed will, death certificate, or a letter from the executor or administrator of the deceased person’s estate, or the deed, (if applicable).

Once the mortgage servicer confirms you as a successor in interest, by verifying your identity and ownership interest in the property, you have the right to remain in the home and keep making payments. Furthermore, the mortgage servicer must communicate with you about all aspects of the mortgage. If there are mortgage arrears, and a loan modification is needed to adjust payments and bring the loan current, a successor can apply for a loan modification as well. You may also have the right to submit to the mortgage servicer a “request for information” and a “notice of error”. Finally, a successor may also apply for Chapter 13 bankruptcy, if that’s an option.

You may need to fill out an application and provide income information in order for the lender to assess whether you can afford the modified mortgage payments. Depending on the type of loan your relative had, the rules for reviewing a loan modification application may differ slightly.

No, you do not. Under most programs, for example, FHA, Freddie Mac or Fannie Mae, the successor is not required to assume liability before being reviewed for a loan modification.

If you live in the property, and want to keep the home, you may have to buy out the other heirs. Whether you can do this depends on your financial or income situation, among other things. You should discuss your situation with a legal services provider to understand your options fully.

You can call the NYS Homeowner Protection Hotline at 855-466-3456 to be connected to a legal services provider. To make a complaint where you believe that the lender has acted improperly against you as a rightful heir and potential successor in interest, you can submit a complaint to the Consumer Financial Protection Bureau (CFPB) here, and/or the New York State A.G.s office here.

The information in this document has been prepared by The Legal Aid Society for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon any information without retaining professional legal counsel.