If you aren’t the original borrower on a home loan, but you inherit a mortgaged property or get ownership through a divorce or other intra-family transfer, can you take over the mortgage? If you're legally considered a success in interest, the answer is yes.
In addition, federal law requires the lender and loan servicer to:
- promptly confirm your status and communicate with you
- give you information about how to continue to pay the mortgage
- let you take over the mortgage loan, and
- give you the opportunity to apply for available loss mitigation options, like a loan modification.
Taking Over the Mortgage Payments After a Loved One Dies
After you inherit a mortgaged property or get ownership through a divorce or other intra-family transfer, a federal law called the Garn-St. Germain Depository Institutions Act of 1982 gives you the right to keep making payments on the loan. To get this right, you’ll have to qualify as a successor in interest. And, if you qualify as a successor in interest and you want to take over liability for the loan (not just make the payments), the lender has to let you do so and recognize the assumption.
In addition, the federal Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) require the servicer to communicate with you about the loan and consider your application for loss mitigation if you submit one. These laws could potentially help you avoid losing the home to a foreclosure if you can’t afford the monthly payments on the existing mortgage.
What Is a Successor In Interest?
Again, to qualify for the rights and protections that the Garn-St. Germain Act, RESPA, and TILA provide, you have to qualify as a successor in interest.
A "successor in interest" is someone who gained an ownership interest in the mortgaged property from the borrower through a specific kind of transfer, like:
- a transfer by devise (like in a will), descent, or operation of law on the death of a joint tenant or tenant by the entirety
- a transfer to a relative after the death of a borrower
- a transfer where the spouse or children of the borrower become an owner of the property
- a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property, or
- a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which doesn’t relate to a transfer of rights of occupancy in the property. (12 U.S.C. § 1701j-3, 12 C.F.R. § 1024.31, 12 C.F.R. § 1026.2(a)(11) (2024).)
Your Rights Under the Garn-St. Germain Act
Loan contracts, like mortgages and deeds of trust, usually have a “due-on-sale” clause. This provision says that if the property is transferred to a new owner, then the loan balance can be accelerated, and the entire loan amount must be repaid. Under the Garn-St. Germain Act, however, the servicer can’t enforce a due-on-sale clause after some specific kinds of transactions, like those situations mentioned above. (12 U.S.C. § 1701j-3, 12 C.F.R. § 191.5 (2024).)
If you qualify as a successor in interest under the Garn-St. Germain Act, you can remain in the home and keep making payments on the loan, and the transfer can’t be the basis for acceleration and foreclosure. This federal law applies to most lenders and mortgage loans, subject to some exceptions, like reverse mortgages. (12 C.F.R. § 191.5 (2024).)
But continuing to make the payments probably doesn’t constitute an assumption of the debt or add you to the promissory note as a liable borrower. Successors in interest also have the right to assume the loan and become personally obligated for the debt.
Mortgage Servicing Requirements Under RESPA and TILA
Under RESPA and TILA, servicers must have policies and procedures in place to confirm your status as a successor in interest quickly. (12 C.F.R. § 1024.38, 12 C.F.R. § 1024.31, 12 C.F.R. § 1026.2(a)(27)(2024).)
Once the servicer has confirmed your identity and your ownership interest in the property, you’re entitled to many of the same protections that a borrower would receive under federal mortgage servicing laws, even if you haven’t assumed personal liability for the loan. (12 C.F.R. § 1024.30(d)-1, (d)-2, See official interpretation).
Some of these protections include:
- the right to send requests for information and notices of error and
- the right to apply for loss mitigation and be evaluated for all options, even if you haven’t assumed the loan. (But the servicer might require you to assume the loan as a condition of a loss mitigation offer.)
Generally, these protections and servicing obligations apply to most mortgage loans, including first or subordinate liens on one-to-four unit principal residences. (12 C.F.R. § 1024.30 (2024).) Some entities, however, like the Federal Deposit Insurance Corp., and small servicers are generally exempt from having to comply with the requirements.
Speak to a Lawyer
In addition to protections under the Garn-St. Germain Act, RESPA, and TILA, state laws or bankruptcy laws sometimes provide rights to successors in interest. For information about your rights in your specific circumstances and to find out about the laws in your state, talk to an attorney.