The term “successor of interest” refers to the passing of an individual’s interest in property or business ownership to another party. Ownership generally transfers upon death and commonly goes to a spouse or child.
If a parent dies and you become the successor of interest for their house, federal law states that the mortgage passes to you. This negates any clause in the mortgage that may state the entire payment is due-on-transfer. The negation prevents heirs from coming into a windfall of financial burden following the death of a loved one.
In the past, foreclosures upon properties that transfer to successors of interest were common, since mortgage lenders refused to communicate with anyone other than the borrower, even when the borrower was deceased. New regulations from the Consumer Financial Protection Bureau (CFPB) have improved communication between mortgage lenders and successors of interest, which has helped to prevent foreclosures on inherited property.
If you become a successor of interest following the death of a family member or spouse, your first step should be to open up a dialog between yourself and the lending company. There will likely be an exchange of documents to confirm that you are in fact a successor of interest. This may include a death certificate.
This process can be confusing and very emotional. We recommend that anyone who unexpectedly becomes a successor of interest consult with a legal team for help and guidance. Call us today, we are happy to consult on the details of your situation.