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Could a mortgage cause issues in probate?

Many Oklahoma residents assume that their home will pass to one or more heirs following the death of the homeowner. When individuals can pass mortgage-free property to children or others, it's a wonderful thing. However, with a growing trend in reverse mortgages and other economic factors, many families are finding that homes are still mortgaged upon the death of a loved one.

The process of transferring a mortgaged property during estate administration can be difficult for some families, and it was made more difficult by an Ability to Repay rule that went into effect in January. The rule essentially says that banks are required to evaluate whether a person has the ability to make repayment before the person can be added to or approved for a mortgage.

One unintended consequence of the rule was that individuals were losing their homes following the death of a loved one, because they didn't qualify to be added to a mortgage under the strict guidelines. One consumer finance agency addressed the problem by issuing an interpretative reading of Ability to Pay that doesn't require banks to use the rule when dealing with heirs and mortgages.

It's important to note that heirs are not guaranteed that they will be able to get loved one's home if they cannot afford to keep up the mortgage payments. Therefore, planning ahead is a good idea. People can add one or more heirs to a mortgage earlier or help ensure that heirs are prepared for any financial burdens that come with an estate. Either of these actions can help protect property and ensure that heirs can keep homes in the family if they desire. It's especially important to plan ahead if any heirs -- including spouses or children -- rely on the home in question as a living space.

Source: Credit Union Times, "CFPB Clarifies Inherited Mortgage Rules" Nicholas Ballasy, Jul. 09, 2014

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