“My husband died and the mortgage company won’t talk to me.”
This is becoming a common statement that I hear. Mortgages and the actual deed to real estate are NOT connected. They are separate. So, for example, if a spouse dies with a house in their name the other spouse can often use a “spousal property petition” to transfer assets to themselves without going through a full probate. However, the mortgage, or encumbrance against the property, does not transfer with the “deed” or title.
Say it isn’t so Mr. California Probate Lawyer!
Plus, mortgage companies are making it more and more difficult to communicate with them after death. Sure I have known of people who have pretended to be the decedent and that can last for years but eventually that will stop working. Plus it’s not legally correct to do that!
I recently encountered an interesting situation. Mom and son were thoughtful enough to prepare a deed, before mom died, to transfer her home to her son.
Now, since you read my blog you know this might have negative tax ramifications after death but, putting that aside, it avoided probate so in general it’s fine. However, the mortgage company really doesn’t care about the deed transfer. They do not care because the deed transfer is completely separate from the underlying mortgage. The client wants to talk to the mortgage company about a loan modification. The mortgage company won’t talk to him since mom is dead. This is truly a problem.
What can be done?
Rightfully so the client wants to avoid a full probate. I do believe a full probate can be avoided. The answer is Letters of Special Administration.
Letters of Special Administration is basically a limited probate. It’s limited to whatever is specified in the petition. The more limited it is the more likely the court will approve it. We thus may ask for limited powers to communicate with XYZ Mortgage Company regarding loan 1234. Or maybe we will ask for general powers related to real estate.
See California probate code 8544 below:
8544. (a) Except to the extent the order appointing a special
administrator prescribes terms, the special administrator has the
power to do all of the following without further order of the court:
(1) Take possession of all of the real and personal property of
the estate of the decedent and preserve it from damage, waste, and
(2) Collect all claims, rents, and other income belonging to the
(3) Commence and maintain or defend suits and other legal
(4) Sell perishable property.
(b) Except to the extent the order prescribes terms, the special
administrator has the power to do all of the following on order of
(1) Borrow money, or lease, mortgage, or execute a deed of trust
on real property, in the same manner as an administrator.
(2) Pay the interest due or all or any part of an obligation
secured by a mortgage, lien, or deed of trust on property in the
estate, where there is danger that the holder of the security may
enforce or foreclose on the obligation and the property exceeds in
value the amount of the obligation. This power may be ordered only on
petition of the special administrator or any interested person, with
any notice that the court deems proper, and shall remain in effect
until appointment of a successor personal representative. The order
may also direct that interest not yet accrued be paid as it becomes
due, and the order shall remain in effect and cover the future
interest unless and until for good cause set aside or modified by the
court in the same manner as for the original order.
(3) Exercise other powers that are conferred by order of the
(c) Except where the powers, duties, and obligations of a general
personal representative are granted under Section 8545, the special
administrator is not a proper party to an action on a claim against
(d) A special administrator appointed to perform a particular act
has no duty to take any other action to protect the estate.
The highlighted portion above is key as it should allow the Special Administrator to deal with the mortgage company and figure out a plan for the mortgage.
Fees in special administration cases are by agreement of the parties. The typical statutory probate fee schedule does not apply. I generally offer these on a flat fee basis to give the client’s the most certainty and avoid surprises.
I should add that special letters can be used in many other situations such as accessing bank accounts to pay mortgages and funeral expenses, investigate safe deposit boxes, and more. The key is getting the court order so it’s all legal!