Assuming Deceased Husband's Mortgage: Florida's Legal Process

If you've recently lost your husband and are wondering how to assume his mortgage in Florida, there are a few things you should know. Firstly, it's important to understand that mortgage debt doesn't simply disappear when a person dies. The mortgage company should be notified of the death as soon as possible, and you may need to provide a death certificate and proof that you're the inheritor of the house. The good news is that federal law allows surviving spouses to take over the mortgage rather than paying the full balance, as long as they can prove financial ability and creditworthiness. This is known as the assumption process, and it can be complex, especially if there are multiple heirs or you aren't the executor of the will. To make things easier, consider hiring a lawyer and gathering necessary documents, such as the deed to the property.

The Garn-St. Germain Act and other legal protections

The Garn-St. Germain Depository Institutions Act of 1982 is a federal law that applies to Florida probate proceedings. It is named after its sponsors, Congressman Fernand St Germain, Democrat of Rhode Island, and Senator Jake Garn, Republican of Utah. The Act simplifies the process of transferring property to family members by preventing lenders from enforcing a "due-on-sale" clause in many situations. This clause is a contractual provision that allows lenders to demand full payment of a mortgage loan when any part or all of the property securing the loan is sold or transferred without their prior written consent.

The Act specifically addresses the enforcement of "due-on-sale" clauses in mortgages and has important implications for the administration of estates during probate. It ensures that transfers of property to family members do not prompt immediate mortgage repayment demands, which is particularly useful for estate planning and asset protection. It also supports transferring properties into trusts, avoiding the lengthy and costly probate process and ensuring a smoother transition of assets.

In addition, the Act prohibits the enforcement of a "due-on-sale" clause after specific kinds of transactions, such as a transfer by devise, descent, or operation of law upon the death of a joint tenant; a transfer to a borrower's spouse, children, or relatives who will occupy the property; and a transfer resulting from a decree of dissolution of marriage or legal separation agreement.

The Garn-St. Germain Act also gave states with prior laws concerning allowable due-on-sale clauses three years to reenact or enact new restrictions. It is important to note that this Act does not apply to all situations, and seeking legal advice is recommended to avoid unexpected mortgage complications.

Other legal protections for surviving spouses in Florida include rules enacted by the Financial Protection Bureau (CFPB), which make it easier for a surviving spouse to assume a deceased spouse's mortgage debt.

Mortgage protection insurance (MPI)

In Florida, a surviving spouse often has the right to stay in their home and take over the mortgage under federal and state laws. However, assuming the existing mortgage only works if you can afford to continue making the payments.

MPI is similar to life insurance, but the beneficiary is the deceased’s mortgage lender. MPI is not as flexible as other types of insurance like disability insurance and life insurance. It is also known as "mortgage life insurance". These policies are often compared to other types of insurance policies, like life insurance or short-term and long-term disability insurance. However, there’s one big difference: Your loved ones won’t benefit directly from an MPI policy. Instead, your mortgage lender is the beneficiary — they’ll receive the policy’s payout. It’s also important to note that MPI policies typically only cover your remaining loan balance and any interest charges.

The cost of MPI depends on things like how many years are left on the mortgage, the mortgage balance, the policyholder’s age and property location. The average cost of MPI is around $50 per month. However, the cost of your premium can vary widely depending on a number of factors — these can include your age, health, location, lifestyle, occupation and loan size. Generally, younger, healthier individuals with smaller home loans pay less, while older people, those with larger loan balances and those with health conditions pay more.

There are two types of MPI policy. With a declining payout policy, the potential payout shrinks over time as you make payments on your mortgage. With a level term policy, the payout amount stays the same throughout the term of the loan. But with both types, the monthly premium stays the same until it’s paid off. MPI isn’t required, so it depends on your personal situation whether it makes sense for you.

The executor of the will

In Florida, the executor of the will, also known as the personal representative, is chosen by the deceased during their lifetime and must follow the instructions of the will. The role of the executor is to handle the financial and legal duties that must be performed to officially close the deceased’s estate, a process known as probate. Probate involves identifying and gathering the assets of a deceased person, paying the decedent’s debts, and distributing the decedent’s assets to their beneficiaries.

The first thing the executor should do after the death is to take possession of all the deceased’s legal records. They will need all the necessary legal documents before transferring money and property. This includes:

• The most recent original version of the will, including all trusts and codicils, or amendments.
• An inventory of assets, as well as instructions for distribution of the decedent’s personal property, such as furniture, jewelry, heirlooms, or home furnishings.
• Deeds and titles. You'll need a copy of all deeds for real estate holdings and property owned by the decedent, as well as certificates of titles for vehicles.
• Tax returns. Obtain copies of the decedent’s income tax returns for the last three years.
• Life insurance. Gather any life insurance policies belonging to the decedent.
• Financial statements. You'll need copies of current bank statements for all banks and accounts, including investment and brokerage accounts.
• Funeral receipts. You'll need copies of any end-of-life bills that have been paid, such as the funeral bill, cost of the casket, and memorial services.

The executor must also deposit the will with the clerk of the court within 10 days of the death. They should do a change of address for the decedent’s mail to ensure all assets are discovered and bills are collected and paid. The executor should search the decedent’s bank and financial records to identify any potential creditors that might seek payment from the estate. They must prepare the decedent’s final tax return for submission to the IRS, when applicable. An inventory of the estate must be submitted to heirs and the probate court within 60 days of being appointed as the personal representative.

If the deceased had a valid will, the court will admit it to probate to transfer ownership of probate assets to the named beneficiaries. If there is no will, the court will appoint a close friend or relative as the executor if there are no surviving family members. Sometimes, the court may appoint a professional executor, such as a lawyer or CPA.

Due-on-sale clauses

A due-on-sale clause is a provision in a loan or promissory note that enables lenders to demand the remaining balance of a mortgage loan be repaid in full if a property is sold or transferred. This clause protects lenders by preventing buyers from assuming a mortgage contract with a below-market interest rate. Due-on-sale clauses exist to protect mortgage lenders' rights when a property is sold.

In the context of a deceased borrower, a due-on-sale clause can be enforced by the lender, requiring the immediate repayment of the mortgage balance when the mortgaged property is transferred to a new owner. However, there are legal exceptions that prevent lenders from invoking the due-on-sale clause and provide protections for surviving spouses and heirs.

The Garn-St. Germain Depository Institutions Act of 1982 prevents lenders from enforcing due-on-sale provisions when ownership transfers to a surviving joint owner or owners, as long as the house was owned jointly by the borrower and co-owner(s) as joint tenants. Additionally, if the borrower's surviving spouse, child, or relative inherits the house and continues to live in it, the due-on-sale clause cannot be invoked, and they can assume the mortgage without triggering it.

The Consumer Financial Protection Bureau (CFPB) has also enacted rules that guarantee surviving spouses the same rights as the original borrower, including the ability to assume the mortgage and take over payments. These protections are further supported by state laws, which may vary depending on the state but aim to help surviving spouses stay in their homes and navigate the mortgage process.

It is important to note that while due-on-sale clauses are prevalent, they are not always legally invoked by lenders, especially in cases of divorce, separation, or inheritance. The decision to invoke the clause is at the lender's discretion, and they may choose not to if it is financially advantageous not to do so.

Consulting a lawyer or financial advisor

As a surviving spouse in Florida, you may be able to assume your deceased husband's mortgage and remain in your home. However, consulting a lawyer or financial advisor can provide you with specific advice tailored to your situation and help you navigate the complexities of the mortgage assumption process. Here are some reasons why seeking professional advice is beneficial:

Understanding Your Rights and Legal Protections:

The laws governing mortgage assumption vary from state to state, and a lawyer can help you understand your specific rights and legal protections in Florida. For example, under the Garn-St. Germain Act, lenders are prevented from enforcing due-on-sale clauses in certain situations, such as when a surviving spouse inherits the property. Additionally, the Consumer Financial Protection Bureau (CFPB) has enacted rules that guarantee surviving spouses the same rights as the original borrower, making it easier for you to assume the mortgage and manage the payments.

Guidance on Documentation and Processes:

Assuming a mortgage involves gathering and submitting various documents, and a lawyer or financial advisor can guide you through this process. You may need to provide proof that you are the rightful inheritor of the property, obtain proper authorizations or paperwork (such as the property deed), and notify the mortgage company of your spouse's death. They can also advise you on any court procedures that may be required, especially if there are multiple heirs or complex estate matters involved.

Exploring Your Options:

Communicating with Lenders:

Lawyers and financial advisors are well-versed in communicating with lenders and can assist you in presenting your case effectively. They can guide you on what information to provide, how to demonstrate your financial ability and creditworthiness, and what options you may qualify for. This communication is critical to ensuring a smooth transition and avoiding potential issues with the lender, such as missed payments or foreclosure.

Handling Complex Situations:

If there are multiple heirs, conflicts among family members, or complex estate matters, a lawyer can provide invaluable assistance. They can help mediate disputes, ensure that your rights are protected, and guide you through the legal processes involved. Additionally, a financial advisor can help you assess your overall financial situation, especially if you are considering refinancing or taking on the financial responsibility of the mortgage alone.

Frequently asked questions