DEAR BENNY: My husband and I inherited a home from my husband’s uncle who passed away a few weeks ago. Will the lender expect us to refinance the home or can we just assume it even if it is a conventional loan? –Karen
DEAR KAREN: Unless the existing loan was from a private person, it is most likely covered under the Garn-St. Germain Depository Institutions Act of 1982. This federal law puts restrictions on the ability of a lender to exercise the “due on sale” clause that exists in most mortgages (also called deeds of trust). One of these restrictions reads as follows: “With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, 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. …”
Accordingly, you should advise the lender of the death, and just continue paying under the terms and conditions of the old mortgage.
However, do you know what the interest rate is on that property? Rates are currently very low, and if you can get a better rate — and assuming that you and your husband can qualify for a new loan — you should consider refinancing.
DEAR BENNY: My father co-signed on my mortgage approximately 12 years ago. We are both listed on the title/loan papers, although I have been the only one actually paying the mortgage all this time. If one of us died would the property automatically go to the other party or do we need to make further arrangements for that to happen and stay out of the probate process? Any help that you could give me would be greatly appreciated. –Kimberly
DEAR KIMBERLY: The answer depends on how title is held. This answer must be general in nature, because different states have different procedures. If you were married, you and your spouse would generally hold title as tenants by the entireties; on the death of one, the survivor would own the entire house.
But clearly you are not married to your father. Thus, you can hold title as joint tenants with rights of survivorship — which means that on the death of one joint owner, the survivor owns the entire property, and probate regarding the house is not necessary. However, if you and your dad hold title as tenants in common, on the death of one owner, his/her share of the property will have to go through probate. On the death of one tenant in common, his/her share is distributed according to the last will and testament, or if there is no such will, then according to the laws of intestacy in your state. But probate is required for this type of title.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.
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Filed under: Finance, Legal Advice in Common Scenarios, Mortgage, Retirement | Tagged: Business, Concurrent estate, Financial Services, Loan, Mortgage, Refinancing | Leave a comment »
Gov Regulation Clogs Pipes w/ Home Valuation Code of Conduct #HVCC #realestate
It’s no secret that many facets of lending and real estate have changed as a result of the credit crisis. In addition to tightened lending practices that resulted from rising mortgage delinquencies, Washington has been heavily involved in altering the way lenders do business today.
Two individual pieces of legislation impacting our business need to be taken into account when determining closing dates for purchase transactions.
Home Valuation Code of Conduct – The Home Valuation Code of Conduct (HVCC) went into effect May 1, 2009. Intended to shield appraisers from undue influence from loan officers and lenders, this legislation installed a “firewall” between those individuals directly involved in the origination of the loan from the selection of and contact with appraisers.
HVCC also requires that borrowers receive a copy of the appraisal a minimum of three days in advance of closing. Part of the kicker here is that “received” is considered, in effect, three business days after the appraisal has been mailed to the borrower.As HVCC requires a firewall between the originator and the appraiser, the time to receive an appraisal has increased, in some cases by as much as two weeks or more. While this may not always be the case, it is important to take into consideration when considering closing dates. Today, conservative closing dates are mandatory to properly manage expectations of all parties.
Housing and Economic Recovery Act – The Housing and Economic Recovery Act (HERA) amends and impacts several aspects of obtaining a mortgage, the disclosures required for borrowers, and the timing of their delivery. This impacts the minimum time required to close, and should any changes be made to a loan application that could impact the Annual Percentage Rate (APR), this could impact the closing date.
Other than paying for a credit report, lenders may not accept any additional fees from a borrower until four business days after disclosures have been provided to or mailed to a borrower. This has the potential to delay several aspects of the application process.
Finally, upon making application, a borrower is provided a Truth in Lending (TIL) statement, detailing the total expected costs that could be incurred over the life of the loan. Should anything change in the loan application that could change the APR by more than .125%, a new TIL must be reissued to the borrower a minimum of 3 business days before closing. Items impacting the APR could include a borrower accepting a higher interest rate than initially qualified by floating their rate at application, a change to the loan amount, a change in product, a change in closing date, and any changes to fees.
What Now? – While there is more we can discuss on the specifics of these legislative implications, I felt it important enough to let you know now that I would not recommend you write purchase contracts with short closing time frames.
This video can provide both my buyers and sellers the rationale behind not scheduling closing dates in advance of 30 days at a minimum and ideally not less than 45 days. If you want to see some Pres and Media on HVCC look here and if you wish to just sign the petition against it click here. You can also view signatures here.
This whole matter is a knee jerk reaction to abuses in the system, causing too much regulation and hence the clog, besides being generally impractical. Thanks for reading and commenting and, please pick up the phone and call me if you have more questions.
Sincerely,
Carlo
Filed under: Buying, Commentary, Current Events, Petition, Real Estate Market, Selling | Tagged: Annual Percentage Rate, Appraiser, Business, Housing and Economic Recovery Act of 2008, Loan, Mortgage, Real estate, Washington | Leave a comment »