Dear Real Estate Adviser,
My husband passed away suddenly almost a year ago. I have yet to inform the bank holding the mortgage. I'm in my mid-50s, have a good job and have been making the mortgage payments on time. I am considering selling the house. Am I breaking some kind of law by keeping my husband's death from the bank?
-- D. Vanderhoff
First of all, I'm sorry to hear of your loss. Obviously, the death of a loved one can be overwhelming and the fear of any resultant financial insecurity is very real.
I'm guessing your apprehension about reporting his death to the lender might stem from a concern that you're not in a position to qualify for the same terms with his name taken off the loan. That would be particularly true if the mortgage was in his name only.
Technically, if one of the parties, or "makers," of a financial instrument dies, the lender is not always obliged to honor that arrangement since the basis of the loan has changed. However, there are federal laws that protect widows and widowers in such situations, provided they're listed as a borrower or joint titleholder.
Because you are withholding such relevant information, a stickler at the bank might try to accuse you of fraud. But it's doubtful you'd be subject to any kind of criminal offense. (I am not an attorney, however, so here is where I suggest you contact a lawyer with any legal questions.) I do know that if you've neglected to report his death to the Social Security Administration, however, and continue to receive checks, you've opened yourself up to more serious sanctions.
Even if you had reported your husband's death, the bank still might have had the option of whisking away the loan if you weren't on that note or house deed. However, it's typically bad business to do so because lenders don't need more distressed real estate on their books. In addition, you have been current with the payments. Lenders in such cases will usually allow an assumption of the mortgage or at least allow you to refinance. But not always.
There's one extra incentive here for notifying the bank: If your husband carried credit life insurance on the mortgage -- which is not uncommon -- the house would be paid in full upon his death. Look for the original loan documents and check to see if this is the case.
As an aside, if you haven't done so already, you need to change the beneficiary on your will, bank accounts and any life insurance policies you have. You also need to change the title of your husband's car if it was in his name only.
But I'm afraid you are going to have to breach this subject with the bank, particularly if you want to sell soon. If he is still listed as a present owner, his signature would have to appear on any sales paperwork. So it's probably time to set the record straight.
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