By Kim Boyer

“The home that I live in is owned solely by my husband and the mortgage is just in his name.  Now that he has died, what do I do?” After a relative dies, it helps to know what you can expect regarding the home and mortgage.  The first step it to determine how the home is titled.  If the home is in a trust, then a probate is not needed in Nevada and the home will be distributed according to the terms of the trust.  If the home is solely in the name of the decedent, and there is no beneficiary deed on the home, then a probate is needed in the state of Nevada.

What about the mortgage?  The mortgage is secured on the real property and the lender does not need to file a creditor’s claim in the Nevada probate proceeding.  The Garn-St Germain Depository Institutions Act of 1982, or simply called Garn-St Germain (12 USC §1701j-3), is a federal law discussing what happens with a mortgage after a relative dies.  Before this law was put in place, mortgage lenders treated a borrower’s death as if the property had been sold, which could trigger the due-on-sale clause in the mortgage.  This meant that the surviving spouse or other relative would have to refinance the house and pay off the existing mortgage, sell the home or face foreclosure.  Garn-St Germain provides that the mortgage lender may not force a surviving spouse or relative to refinance or sell the property, and allows for the surviving spouse or relative to continue to pay the mortgage payments.  Continuing to make the payments does not mean you have assumed the loan or become a borrower on the loan.  Garn-St. Germain encourages lender to allow assumption of a mortgage, either at the contract rate or a rate between the contract and market.

Garn-St Germain provides that the following are not considered property transfers that would trigger the due-on-sale clause:  (1) creation of second mortgages;  (2) purchase money liens for household appliances; (3)  termination of joint tenancies;  (4)  leases of less than three years (even if renewable);  (5)  transfer to a relative resulting from the death of a borrower;  (6)  transfers of ownership to spouse or children of the borrower;  (7)  divorce or legal separation settlements or Court Orders;  (8)  transfers into an inter vivos trust (a living trust) if the borrower is a beneficiary; and (9)  other transfers approved by the relevant Federal agency.

There are other protections available to a surviving spouse or other heirs.  The Consumer Financial Protection Agency Act of 2010 created the Consumer Financial Protection Bureau (“CFPB”), which has enacted several rules to make it easier to assume a mortgage.  Lenders can name the inheritor as the borrower on the loan without the inheritor having to go through the qualification process.  So, if you inherit the home wants to keep it, the options include: (1)  pay off the existing mortgage using other assets; (2)  refinance the loan in your own name and the lender will examine your income, credit, assets, etc.; (3)  assume the mortgage and have the loan in your name using the protections of the CFPB or (4)  continue making payments on the existing loan.  You will still have to find a way to pay the mortgage.  If you are a stay-at-home mom with minor children, ideally you and your spouse would have put plans in place to help you cover the mortgage, such as adequate life insurance.

If you inherit property with a reverse mortgage, Garn-St Germain does not apply.  There are other laws that protect a surviving spouse when there is a reverse mortgage.

It is best for you and your family to plan ahead and put in place proper estate and financial plans.  If planning was not done and a Nevada probate is needed, know that under federal laws there are protections for the inheritor regarding the mortgage.

Disclaimer:  Information provided as a service of Kim Boyer, Certified Elder Law Attorney, updated as of 09/17/22. It does not constitute legal advice. For specific questions you should consult a qualified attorney.