Legal Question in Wills and Trusts in Virginia

Well, first, there is no guarantee that a bank or any other person will obey the law or do what they should do. It is always possible that a bank could decide to do something dumb or even illegal.

But, second, in general a bank or financial institution would hae no right to foreclose on the properties if the property is inherited AND the heir continues to make the payments, UNLESS there is a specific provision in the mortage (Promissory Note and/or Deed of Trust) that makes the mortgage due upon a sale or inheritance.

So, unless there is something EXPLICIT in the mortgage documents giving the bank the right to "call" (accelerate) the mortgage loan then NOTHING would happen upon the parents death IF the children continue to make the payments.

So you or your attorney would have to search in the mortgage documents for some explicit paragraph or paragraphs about the right to ACCELERATE or "call" the mortgage if the property is SOLD or the homeowner goes BANKRUPT or similar situations.

If there is such a provision (very likely) someone would need to study that paragraph or those paragraphs to see if INHERITANCE or any other change of ownership is covered in those paragraphs.

ONLY if the mortgage documents explicitly state that the mortgage can be called or accelerated upon a change of ownership due to inheritance would that be true.

Third, I would suggest that you explore life insurance to pay off some or all of the mortgage balance upon the parents' death. I don't do much with life insurance, but from some of the advertisements I hear an amount sufficient to pay off most mortgages might be a lot cheaper than you might think.

Life insurance might be significantly cheaper than otehr options.

For example, I might suggest refinancing the properties to get a mortgage that you KNOW will not be a problem. But the costs involved in refinancing might be far more than just getting life insurance to pay off the mortgage balances.

Fourth, your wills would not affect this. Your wills would determine who owns the house after your passing. But it woudl not be binding on the bank or mortgage company.

The question is wehther the mortgage company has to accept the new borrowers.

You might understand the bank's perspective. They might say we know that the parents are good credit risks. But we don't know anything about the children. So why should we be forced to accept the children as a credit risk when we never agreed to lend to them.