problem with POD gift from grandfather

I recently asked a question about how to deal with late payments on a home given to me by my grandfather. The answer was to go in with a plan, which we planned on doing Monday consisting of catching up and guaranting payments with an allotment from my moms annuity. I notified the bank of his death and now they are saying a loan cant be kept in a dead mans name and we may have to refinance to put in my name. I have poor credit and am stressed they are going to take the home with what is called something like estate default.....what, if anything can we do? How soon can they take the home? the balance is 45,000 and my mom's credit is 619 due to a bankrupcy several years ago. We are still going to go in and attempt to have our plan reviewed but how much time do we have if they don't accept it? We even called the 800 # for Midwest bank before speaking to the local branch and they said there would be no problem as long as we caught up on arrears giving us conflicing information Should we sell? Are there private lenders groups who give loans to ppl with bad credit? It is my first home and I want to stay in it...Thank you for any answers!!!

1 Answer

Your understanding is not exactly accurate. A lender can not force you to payoff or refinance a loan due to the fact that you inherited a property. BUT, if you do not comply with the terms of the loan they can foreclose and take the property.

So if you can pay the past due amounts and bring the loan current then all you should have to do is make the payments according to the terms of the loan.

The problem is if you need to modify the terms of a loan and the note holder is deceased.

So if you can catch up on the arrears you may not have a problem, but if you need a loan modification or forebearance, that can be a problem.

See Preemption of due-on-sale prohibitions:

"With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units...a lender may not exercise its option pursuant to a due-on-sale clause upon—...(5) a transfer to a relative resulting from the death of a borrower;...."

Contact a real estate attorney for advice on your specific situation.