Legal Question in Wills and Trusts in California

The mortgage should have a due on sale or change in ownership clause in it, so that the bank can treat the entire loan as now being due. So you have to go to the bank and convince them to let you assume the loan

What you inherit is the equity. You don't inherit the loan. You don't get to step into the mortgage without qualifying with the bank. Sometimes, the bank treats is, as mentioned, as a change in ownership and the loan is due because the person guaranteeing the payment to whom they loaned the money is either dead or selling the asset that was used to secure the loan. When the asset is sold, the bank will be paid first in satisfaction of their lien. If you don't want to sell the home, you will need to qualify for your own home loan.

I don't believe they can call the loan on residential in the heir is the spouse or child of the deceased and it is a primary residence. Of course, that's assuming that you continue to pay the mortgage.

You ask a very good question.

An heir to a home cannot assume an existing promissory note without the lender's permission. The property, however, is still subject to the existing obligation, secured by a deed of trust. (A lot of people call them mortgages, but mortgages are rare in California, they are actually deeds of trust.)

The death of the owner does not trigger the due on sale clause, but rather the transfer to a new owner triggers the clause. An exception for this is contained in Civil Code section 2924.6. A transfer resulting from the death of an obligor will not accelerate the maturity of principal and accrued interest where the transfer is to a surviving spouse who is also an obligor. (Civ. Code, sect. 2924.6 subd. (a)(1).) Federal law that provides for exemptions from the "due on sale" clause parallels California's state law provisions, but are even broader.

"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 ... a transfer to a relative resulting from the death of a borrower." (12 U.S.C., sect 1701j-3, subd. (d)(5).)

So if the loan was a federally related loan, this exemption from the due on sale clause in the deed of trust would apply.

The loan must be paid, however, or the property will be subject to foreclosure.