Question:
Dear Steve,
My mother has severe Alzheimer’s, and I am her legal Guardian.
When she was starting to get Alzheimer’s, she charged up her credit card to the point that it would have never been paid off.
When I found out about it, I decided not to spend all her money to pay for it as I had to pay for her care and did not have the extra money. She passed.
Fast forward to September 16; her HELCO loan came due, still owing $42,00.00; we received a letter saying she had 30 days to pay it off or they were taking the home.
It is worth $250,000, and they said they would not continue the loan because she defaulted on the credit card with the same bank. So I have been trying to get the money to pay it off with no luck!
What can I do to stop this? the letter said it was their’s as of October 16, 2021
June
Answer:
Dear June,
I’m so sorry to hear about having to deal with a parent with dementia. It is a cruel and painful disease. I lived through that experience, and it was terrible.
I just answered another question from someone with a balloon HELOC. I’m not too fond of balloon loans. Do detest them.
Your mother’s estate will have to go through whatever your state probate process is. Probate is the process of paying off all debts and distributing those proceeds.
The fact assets are moving through probate will not stop a foreclosure.
The Jackson Wite lawfirm attorney advises, “Whatever the cause may be, the personal representative who has been appointed by the probate court to manage the decedent’s estate has a fiduciary duty to prudently manage the assets. That means he or she is required to do everything they can to stop a foreclosure using the estate’s other assets, whether that involves liquidating assets to pay the overdue mortgage balance or selling the house. If the personal representative fails to fulfill their duty of care, the court may hold them personally liable for the estate’s losses if any beneficiaries or creditors sue for damages.
That said, it’s not always possible to save the house from foreclosure, especially if the account was already in delinquency before the decedent passed away. Some lenders can be quite aggressive when it comes to foreclosure practices, and unwilling to give the personal representative a reasonable amount of time to settle the debt or sell the house. As long as the personal representative does their best to fulfill their duty of care, they won’t be held liable for the house’s foreclosure.”
I’m assuming you are the representative of the estate.
Since time is not on your side here, and you do have a duty to render competent care of the assets as the personal representative, I suggest you immediately find a licensed attorney in the state where your mother lived specializing in probate issues.
The attorney may advise filing an injunction to stop the foreclosure of the property or file a Chapter 13 bankruptcy by the estate. This can prevent the immediate loss of the property to the lender.
You will then have time to get the home sold and then satisfy the debts from the proceeds of the sale. Any money left after debts are paid will be distributed to the heirs of the estate.
You will get much more from selling the home than you will from a foreclosure.
Time is not on your side. Act immediately.
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Steve,
I have a related question regarding a mother’s HELOC loan coming due. My 80 year old mother is doing fine health-wise, but not financially. She owes $44,000 on her HELOC for her condo in CT, and it comes due in September 2022. I have a good credit score and live in NY State. Can I take try to get a loan modification and repay the HELOC at a fixed-rate? If so, how many years? 10? 15? 20? Will there be closing costs involved? Do I have my mother transfer ownership of her condo to me so at least I can sell the condo after she passes and recover the cost of the HELOC? If she does transfer ownership to me, should I get a mortgage instead of a HELOC (but I really don’t want to be $4K in closing costs). Thanks for any advice.
Joyce,
Thank you for reaching out to me. Your question and situation have a bit of apple, oranges, and coconuts in it. Meaning, you have diverse issues you need to solve.
The first issue is estate planning. If you are not under any financial stress and well-positioned with savings, then transferring the condo to you now is an option. However, I have no idea what your mother has in place with a will or a trust.
You could always consider Joint Tenants With Rights of Survivorship so the condo will immediately pass to you when she passes.
Pursuing a loan modification or any settlement or change of terms is always possible. Success will depend on the lender policies and programs at the moment. My personal opinion is the longer the term at a fixed rate is always better. There is nothing that prevents you from paying more regularly but if things get tight you can fall back to the lower payment.
The closing cost issue is a false flag. HELOCs with adjustable payments or less favorable terms have a cost as well. If you are planning to hold and keep the condo then the closing cost is the cost of the transaction and can be the less expensive option.
Shopping for a favorable mortgage with a mortgage broker, is a smart thing to do.
Steve
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