Am I Liable for the Loan Once Confirmed as a Successor in Interest?

No. Being confirmed as a successor in interest does not make you personally liable for the mortgage. You owe the debt yourself only if you assume the loan under your state's law, you already signed the promissory note as a co-borrower, or your state's law makes you responsible as a surviving spouse. The lien stays on the home, though: if no one keeps the payments current, the servicer can foreclose and the home can be sold to pay the debt.

A confirmed successor is someone who received a mortgaged home through a family or estate transfer, such as a death or divorce, and whose identity and ownership the servicer has verified. How the successors in interest rule works covers who qualifies and how to get confirmed.

What does confirmation change, and what does it not?

Confirmation makes you a "borrower" only for the federal servicing rules. You can dispute errors and apply for foreclosure help. The Consumer Financial Protection Bureau (CFPB) states in its official commentary that this status does not decide whether you are bound by the loan contract; state law decides that. The servicer cannot require you to take over the loan before it treats you as a borrower.

Some servicing notices are written as if the reader owes the money ("your loan," "you are late"). That wording does not create liability. To avoid confusion, servicers may change it to "this mortgage," add a statement that you are not personally liable, or send an optional notice with an acknowledgment form. That notice must say that, unless you assume the loan under state law, you are not liable for the debt and cannot be required to use your own money or property to pay it, but the lender keeps its right to foreclose. Signing and returning the form only asks the servicer to send you statements and notices. It does not make you liable. The servicer generally need not send duplicates if another borrower or confirmed successor already receives them. You can request copies through a written information request to the servicer.

When would you be personally liable?

You can owe the mortgage yourself in these situations:

• You signed the note. A surviving spouse or other co-borrower who signed the original loan was liable before the transfer and still is.
• You assume the loan. You sign an assumption agreement, or the lender otherwise agrees in writing to make you an obligor on the debt.
• Your state makes a surviving spouse responsible. The Federal Trade Commission (FTC) notes that a surviving spouse in a community property state, such as California, may be personally responsible for a deceased spouse's debts.

Otherwise, the deceased borrower's debts are paid from the borrower's estate, which the executor or a court-appointed administrator settles. The FTC states that family members generally are not personally liable for those debts. If the estate cannot cover the mortgage, the lender's main protection is the home itself.

Can the lender call the loan due because the home passed to you?

Most mortgages have a due-on-sale clause, which lets the lender demand full payment when ownership transfers. The Garn-St Germain Act of 1982 bars lenders from enforcing that clause on a home with 1 to 4 units after these transfers:

• A co-owner with survivorship rights (a joint tenant or tenant by the entirety) dies.
• A relative receives the home because the borrower died.
• The borrower's spouse or children become owners.
• A spouse becomes an owner through a divorce decree, legal separation agreement, or property settlement.
• The borrower moves the home into a living trust, remains a beneficiary, and keeps living there.

In those cases you can keep the existing loan, with its current rate and payment, without assuming it. The federal regulation issued under the law, 12 CFR 191.5, limits the protection for transfers to a relative, spouse, or child to cases where that person lives in or will live in the home. If you plan to rent the home out or leave it vacant, ask the servicer in writing whether it will treat the transfer as exempt before you rely on keeping the loan.

Assuming the loan is your choice, but a loan modification can require it. Fannie Mae's servicing guide, for example, requires a transferee who qualifies for a modification on a Fannie Mae loan to sign an assumption agreement along with the modification agreement. Before you accept a modification, ask the servicer in writing whether it comes with an assumption, because an assumption makes you personally liable for the full balance.

What happens if no one pays?

Payments stay due on the loan's schedule after the borrower dies or the home is transferred. If they stop, late fees build and the servicer can start foreclosure under the mortgage and your state's law.

If you are confirmed and the home is your principal residence, the servicer must treat you like any other borrower who falls behind. It generally cannot make the first foreclosure notice or filing until the loan is more than 120 days past due. It must also evaluate a complete application for loss mitigation, which covers options such as a loan modification, forbearance, or short sale, if the application arrives more than 37 days before a scheduled foreclosure sale. Send it as early as you can. The rules for servicers when borrowers are delinquent list the full deadlines. These steps apply only to a home that is your principal residence. A vacant home can still qualify, depending on the facts and state law.

If the home is lost to foreclosure and you never assumed the loan, never signed the note, and are not liable as a surviving spouse under state law, you do not owe the remaining balance personally. The servicer's claim against you is limited to the home.

What are your options for keeping or selling the home?

Before you sell or refinance, ask the servicer in writing for a payoff statement. The servicer must send an accurate payoff amount within 7 business days of your written request. If the servicer cannot meet that deadline because the loan is in foreclosure or bankruptcy, it must send the statement within a reasonable time. Confirmed successors have the same right to a payoff statement as the original borrower.

For background on what servicers do and who owns your loan, see what loan servicing is.