South Carolina: House title transfer after death with debt

hi,   first post for me, so be gentle ;)

my mother passed away in december 2011.   my brother was primary care give for mom and had been living with her.   her house was titled with mom and my brother "as joint tentants with right of survivorship and not as tenants in common".

from this, my understanding is that the house should pass to my brother outside of probate.    the complication or question i have is due to home equity line of credit outstanding against the house.   the heloc was in mom's name only.

the bank is saying the title cannot be transfered to anyone until the heloc is satisfied.   is that true?

there is not enough assets in the estate to pay the heloc.   my brother is willing to take the debt, but may have trouble qualifying for a loan due to his credit history and current income level.

1) can the bank block transfering the title of the house to my brother?

2) does the heloc debt have to be listed in the inventory of debts for mom's estate?

3) if there are not enough assets to pay the heloc in mom's estate and my brother cannot pay, what happens?  Is there any recourse short of the bank taking the house?

4) i am the exector of mom's estate.  what responsibilities do i have in this situation?

5) do i need to find a lawyer?

thanks!

krlingle:

my mother passed away in december 2011.   my brother was primary care give for mom and had been living with her.   her house was titled with mom and my brother "as joint tentants with right of survivorship and not as tenants in common".

from this, my understanding is that the house should pass to my brother outside of probate

True.

In fact, it already did.

krlingle:

the bank is saying the title cannot be transfered to anyone until the heloc is satisfied.   is that true?

Sort of.

Ownership and title automatically passed to your brother at the moment of your Mom's death. (Condolences, by the way.)

He does not need to do anything with the deed until he wants to sell the house.

However, he won't be able to sell the house without the HELOC being paid off as the house is the security for the loan regardless of who owns it and the loan is not assumable, except that your brother inherited the obligation along with the house.

krlingle:

1) can the bank block transfering the title of the house to my brother?

Yes, but not by having to do anything.

As I wrote, to sell the house, the HELOC would have to be paid off. Without a loan release nobody's going to buy it because the encumbrance will show up in a title search.

krlingle:

2) does the heloc debt have to be listed in the inventory of debts for mom's estate?

I wouldn't think so since the debt goes with the house that secured the debt, and your brother owns the house.

krlingle:

3) if there are not enough assets to pay the heloc in mom's estate and my brother cannot pay, what happens?  Is there any recourse short of the bank taking the house?

That should not be an issue. As long as your brother keeps on making the payments and doesn't touch the deed (which is unnecessary), the bank isn't likely to do anything as long as it's getting it's money.

He should look at the loan contract. Generally, inheriting the house should not activate the due on sale clause as long as he keeps on making the payments.

If he doesn't make the payments, the bank will foreclose and he will lose the house. There is no in-between.

krlingle:

4) i am the exector of mom's estate.  what responsibilities do i have in this situation?

None. The house already belongs to your brother.

krlingle:

5) do i need to find a lawyer?

Depends on how complicated the rest of the estate is and how capable you are of handling it without a lawyer.

South Carolina has simplified processes for estates up to $20,000. Not counting the house and it's contents (which also are presumed owned by your brother now that he owns the house) total up the rest (car, money, etc) and see what your total is.

http://smallestates.uslegal.com/affidavits-and-summary-administration-laws/south-carolina-small-estates-law/

Laymans guess: As executor -smarter to get your lawyer to get it right---

I am not so sure that bank is not full of hot air and as executor you would be unwise to listen to hot air much less pay $$.

1. Brother owns home by operation of title. There is no need to transfer title .

2. Banks secured interest apparently was tied exclusively to Moms interest in the home. Moms interest in the home vanished at the moment of death by operaton of law--Bank now holds an bucket of hot air.

2.1 At least so far brother has zero obligation to pay anybody anything  and he would be stupid to sign anything.

3. The executor is required to address estate obligations in an order set by law odds are the first thing to get paid is the executors fee/commission and coststhen perhaps funeral/burial costs !!  In general the executor addresses debt secured by assets within estate next--but remember the home is no longer in pot, factually it never to to estate pot!  Bank is now in pile of general unsecured estate creditors and that probably  is addressed pro rata--and by that I mean if estate has $1000  and there is 10,000 of debts, easch creditor get 10 cents per dollar.

4. Now do you follow why bank may be in a rush to scare people to sign stuff!

Just a guess absent  specif facts --but you get my drift---now do some more careful homework  and nobody sign a darn thing or pay any $$ until you are positive  you are right.

WARNING -there may be some cross links within the banks fine print from one account to another --at least as a precaution -- I would remove  all funds from said bank from any possibly relevant account down to the lowest possible level and keep it that way at least until dust settles--ditto for brother , and  accounts in moms name, estates name or any combination of names---chose safety first--sort out details later!  And SOON!

Drew:

Banks secured interest apparently was tied exclusively to Moms interest in the home. Moms interest in the home vanished at the moment of death by operaton of law--Bank now holds an bucket of hot air.

That is certainly not true. A thorough reading of the HELOC contract will support my assertion.

Drew:

At least so far brother has zero obligation to pay anybody anything 

True. He doesn't. And the bank has the right to foreclose on the house if he doesn't make the payments.

Drew:

he would be stupid to sign anything.

Probably true because he doesn't have to sign anything.

Drew:

Bank is now in pile of general unsecured estate creditors

Again, the loan was, and still is, secured by the property.

Drew, before you give me an argument about the above comments, I suggest you re-read your own home loan documents. If you have a home loan, whoever inherits your house when you die doesn't get to keep it without continuing to make the payments.

I fully agree that if somebody inherits my home or even if I gift it the new holder takes it subject to loans --but that is precisely NOT what OP addresses.

Anyway--strictly from moldy recollection in B school

If my mother and I own a home  and I go get a loan on said  home and pledge my interest in said home to any willing lender  so be it. I can pledge my interest.  Mom never pledged her interest and no way I can pledge it for her -at least in context of OP .

Did I miss anything?

The question is the nature of my interest which I pledged.

If its TIC I can pledge that interest  , generally 50%  but that not the case.

If its TBE (which is inapplacable except as to married couples)  the pledge would be completely hollow until and  unless other person died first.

OK, so  we have JTWROS.  separate undivided interest in the whole.  I die--my interest vanishes!! My creditor is left holding an empty bag.  Conversely, If Mom died first, My creditor instantly has double the security for his debt! Did I miss anything?

Now in theory Mom could unilatterally separate the interests and make it a TIC and thus protect her side  from my creditors or will her portion to the SPCA.  And my creditors could force a partition while I was alive. But I doubt any of this took place.

Now it just may be that a creative set of loan docuements creates a change on interests so as to make it a TIC.  But if thats the case--how does one recreate a JTWROS title as the mere satisfaction of a loan wold not meet the required multiple unities of interests at the same time?  And Moms interest now passes by will/intestacy?

If the loans weren't obtained by mom before she essentially gave away half her interest in the property by "adding" the brother to the deed, I'd say he has an argument that the bank's ability to go after the house if the loans are defaulted on disappeared when the mother's interest in the property disappeared (on her death).

Chances are, however, that the loans were in place before she did this and the bank didn't mess up (by not having the brother listed as a co-borrower) ... and that mom technically defaulted on the loan by adding her son to the deed.

"the bank is saying the title cannot be transfered to anyone until the heloc is satisfied."

We cannot know what their mortgage says from here, but in theory it's possible that someone would be willing to buy the place subject to the existing mortgage.  The bank of course wouldn't release its security interest in the place unless it was paid.

Brother is free to check the loan documents to see what they say about assumability; so long as the payments are made, the bank won't care about in whose name the loan is financed.

"can the bank block transfering the title of the house to my brother?"

There's no transfer to block; it's already his by default/operation of title.

"does the heloc debt have to be listed in the inventory of debts for mom's estate?"

HAVE to?  If it's a debt she owed, yes.

"Is there any recourse short of the bank taking the house?"

Are you saying no one's in a position to make the payments?  ... not even if they get a second job or rent out rooms??

"what responsibilities do i have in this situation?"

You're obligated to administer the estate and see to it that mom's debts are paid to the extent possible.  The house isn't an asset of the estate if they owned as JTWROS.

"do i need to find a lawyer?"

If you don't know how to administer an estate, that would be a good idea.  Whether your brother can't pay the mortgage on the place is not your problem.  If his being on the deed PRE-DATED mom getting the loan and the bank never bothered to do a title search (and assuming you don't care about the bank coming after the estate for money it doesn't have with regard to a default), you may want to tell your brother to consult with a local real estate attorney because he may be in a position to tell the bank to buzz off.  (Of course, he'd have to file a legal action to clear/quiet title as regards the loan, and that would cost money ...)

Well--you do have a point--a darn good one---and we are flying a bit blind----

If Mom owned the place outright   and then took out a loan and said loan was properly perfected then said loan attaches to the whole.

If Mom then converted her ownership to a JTWROS then the JTWROS as a whole would be uncumbered with the prior note (if properly recorded ahead of all this) .

Sequence matters a lot!

Drew:

If my mother and I own a home  and I go get a loan on said  home and pledge my interest in said home to any willing lender  so be it. I can pledge my interest.  Mom never pledged her interest and no way I can pledge it for her -at least in context of OP .

Did I miss anything?

Yes, I think you are missing that the home was the security for OP's Mom's loan and remains the security for Mom's loan even after her death.

Drew:

OK, so  we have JTWROS.  separate undivided interest in the whole.  I die--my interest vanishes!! My creditor is left holding an empty bag. 

No, the creditor's loan is still secured by the property.

And that's the key to the situation, regardless of any other factors.

South Carolina's foreclosure statute begins with:

• ARTICLE 7. FORECLOSURE
• SECTION 29-3-610. Personal representative of deceased mortgagor as party.
• It shall not be necessary to make the personal representative of a deceased mortgagor a party to any foreclosure proceeding and no sale heretofore made under foreclosure proceedings to which the personal representative of a deceased mortgagor was not a party shall be invalid by reason of the absence of such personal representative.
• SECTION 29-3-620. Mortgagor as party.
• It shall not be necessary to make a mortgagor who has conveyed to another the mortgaged premises a party to any action for foreclosure when no judgment for a deficiency is demanded.

http://law.justia.com/codes/south-carolina/2010/title29/chapter3/

Seems clear from just those two sections that a mortgaged property can be foreclosed even after the mortgagor (OP's Mom) conveyed the premises to another. In this case she conveyed the mortgaged premises to the OP upon her death but it's clear that the mortgaged premises remained mortgaged.

There may or may not, depending on the facts -- again -- be a scenario where the lender is out of luck.  As pointed out earlier, not likely, but possible.

As it relates to the personal rep of an estate and foreclosure, that's not the topic of discussion.  What matters is whether the bank looked after itself properly and whether the mom changed ownership on the property BEFORE or AFTER she got the HELOC.  It has happened where the bank presumes X and doesn't bother doing a title search, etc., and a smart surviving owner is in a position to successfully rid itself of any worries about a loan the bank made to someone who has died in a JTWROS situation.

There is no conveyance involved--its already there.

I agree--if loan was in place ahead of JTWROS the JTWROS is encumberd with loan.

But if title was JTWROS first  and later lender secured only one party--lender gets 0% or 100% depends who passes first--and lender lost an unwise gamle or blooper.

adjuster jack:

No, the creditor's loan is still secured by the property.

And that's the key to the situation, regardless of any other factors.

No, Jack, the details matter greatly. If she took out the loan AFTER she transferred the joint interest to the OP, then in that circumstance when her interest disappeared at her death then the mortgage had nothing left to attach. That's because in that situation, only her interest in the property was encumbered by the loan. Since her interest disappears at death rather than transfers, there is nothing left for the mortgage to attach once she dies. Most lenders are not so careless as to lend to just one owner of a home held JTWROS for that reason, but it can happen. As for the foreclosure statute you quoted, it starts with the premise that there is a mortgage lien that attaches to the property. But in the situation I just described, there is no mortgage that attaches to it once the borrower dies.

If the mortgage loan was in place BEFORE the transfer, then it's a very different situation because the OP's interest in the property he received at the time of the transfer was burdened by the mortgage. Thus, though his name was not on the mortgage and he's not personally liable to pay it, the property is still encumbered by the mortgage.

Taxagent:

If the mortgage loan was in place BEFORE the transfer, then it's a very different situation because the OP's interest in the property he received at the time of the transfer was burdened by the mortgage. Thus, though his name was not on the mortgage and he's not personally liable to pay it, the property is still encumbered by the mortgage.

My comments were based on that presumption.

Re-reading the original post I see that the OP did not say that was the case.

Though I bet it was the case.

It's unlikely that a lender would slip up and give Mom a loan alone (pun intended) when there are two owners on the deed, but I suppose it could happen.

Hopefully we all agree we need OP to give us the date sequence of the JTWROS Deed  and the HELOC --and while you are at it--note the docuement date and the  recording date

Why--because NC I think is one of the  few remaining pure "race" states which sort of means the first recorded date is the one that counts --and if somebody sat on something  too long and somebody else got there first it really might matter!

Drew:

Why--because NC I think is one of the  few remaining pure "race" states which sort of means the first recorded date is the one that counts --and if somebody sat on something  too long and somebody else got there first it really might matter!

1 - The property is in South Carolina (see title of post). But that could also apply there.

2 - Common practice of lenders is to send the documents to be recorded the same day as the loan closes. Hard to imagine a lender slipping up on that either. Even Boss Hogg isn't likely to slip up on that.

Whoops--I need to learn to read--SC is NOT a race state--but I'm not sure if its notice or race-notice or what.

I have a pretty smart friend who let a docuement sit on his desk for 2 days  and that 2 days put him second in a one horse contest.  And another who filed a lien just minutes early enough to count.