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I am asking the following question for a friend, and will try and clarify anything I can.

A recently deceased homeowner has children still living in the house. The house is currently underwater. What is the best course of action for the children? Notify the bank? Continue paying the mortgage as somewhere to live? Something else?

Here is what I know:
1. Homeowner has owned the home since the mid-80s.
2. Home was purchased for ~$55K
3. Mortgage Loan was FHA insured and is in the Homeowner's name only.
4. Payments on the mortgage were very small (~$200-$300/month). I assume interest only, but I am told it was some arrangement because the homeowner had no job, only social security, etc. I don't know the details of this yet.
5. Outstanding balance on the home is ~$85K
6. Past due property tax on the home is ~$10K
7. Homeowners two children have been living in the home for the past 10 years and have no material assets or income.
8. Homeowner recently passed away
9. The state is California.
10. There is no will and no estate with any assets.

I do not know the appraised value of the home, but I am told it is not worth more than the outstanding loan balance ($85K) and past due property tax ($10K).

The children living in the home do not know what obligations they have regarding telling the bank the homeowner passed away.

They have two different scenarios playing out in their minds:
1. They don't tell the bank, continue paying $200-$300/month to live in the house as long as possible. They have nowhere else to go, therefore $200-$300 per month is their best housing option.
2. They tell the bank, the bank decides to foreclose on the house and they stay until the sheriff kicks them out.

Assuming for now the home is worth less than the outstanding liabilities, do they have any legal obligations to tell the bank the homeowner passed away? Also, can/should they continue to pay the amount due for the mortgage (which I can only assume non-payment = foreclosure)?

Also, any suggestions or considerations they should think about?

EDIT: to add additional info

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Most of the time, the bank will pay the back taxes before there is a tax auction to protect their interest.

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Are they adults acting like children, or real children less than 18 years old? Sounds like the original owner is a dead-beat borrowing more money than what they even paid for the house. If these are adult offspring they need to notifiy the bank, move out and earn a living. Seriously, there are jobs out there - I see help wanted signs all everywhere around here lately.

Is there a will? Does the estate have assets?

I am assuming the children are adults.

Normally the executor of an estate will notify debtors.

Yes, the children are adults.

No will and no assets. I do not believe there is an executor of any estate.

Rethinking things, based on the ethics in the OP's post, it is possible the body is still in the house and the death wasn't even reported to the authorities. I think it is time for the aduts to act like it, and call the bank. They can't be children forever. Several of them should be able to get a job, earn some money and rent a place instead of leaching off their dead parent. Seriously.

lonestarguy said:   Are they adults acting like children, or real children less than 18 years old? Sounds like the original owner is a dead-beat borrowing more money than what they even paid for the house. If these are adult offspring they need to notifiy the bank, move out and earn a living. Seriously, there are jobs out there - I see help wanted signs all everywhere around here lately.

Where? What kinds of businesses? I will move there right away. No jobs to be had around here.

Well what would normally happen if your parents passed away and they had a home that wasn't paid off?

Can they leave you the home in the will? I assume the bank doesn't just take it because they will have equity in it?
I would assume that whomever the parents left everything to must have the option to either sell or continue paying off the place?

Whatever would/count normally happen there I expect would be the same situation - if the parents died and there was no will I would expect the next of kin to get everything - that being their kids.

So - if the children can afford to pay the mortgage...then they can stay in the house.

However since you say they are adults and have no assets or income - they are no better than squatters at this point.
What is wrong with these adult children that they have been living with their unemployed parents with no jobs?
Does apathy and entitlement run in the family?

BenH said:   
So - if the children can afford to pay the mortgage...then they can stay in the house.

However since you say they are adults and have no assets or income - they are no better than squatters at this point.
What is wrong with these adult children that they have been living with their unemployed parents with no jobs?
Does apathy and entitlement run in the family?


That was my impression as well, as long as they continue to pay the mortgage, they should be fine.

From what I am told, they have enough income to continue to pay the mortgage (again, which is more like $300 per month and likely interest only). I don't know the family that well aside from my friend (who is a sibling of the adult children...but has a normal job and house, etc).

mjohnson said:   BenH said:   
So - if the children can afford to pay the mortgage...then they can stay in the house.

However since you say they are adults and have no assets or income - they are no better than squatters at this point.
What is wrong with these adult children that they have been living with their unemployed parents with no jobs?
Does apathy and entitlement run in the family?


That was my impression as well, as long as they continue to pay the mortgage, they should be fine.

From what I am told, they have enough income to continue to pay the mortgage (again, which is more like $300 per month and likely interest only). I don't know the family that well aside from my friend (who is a sibling of the adult children...but has a normal job and house, etc).



If your friend is their sibling, you would think that (s)he would inherit a portion of the house.

mjohnson said:   
From what I am told, they have enough income to continue to pay the mortgage (again, which is more like $300 per month and likely interest only). I don't know the family that well aside from my friend (who is a sibling of the adult children...but has a normal job and house, etc).


I believe each mortgage terms can vary, but should spell out what happens in the event of death. The children legally have to let the lender know I would think - but not sure if it is there responsibility.
The lender may require the loan to be paid off (which means they will have to sell...or foreclose), or they may allow the children to continue paying the mortgage.

I would think if the mortgage was in good standing, there isn't much reason why they wouldn't allow the kids to keep paying it (less work for the bank).

Things might work different if there was no will or not - so if it isn't "public knowledge" that there is no will, the kids have the chance to construct something.

It doesn't sound like they are very sharp however...I recommend they keep paying the mortgage for a few months - go out and find jobs - then let the lender know... at which case they may be able to recoup something from the sale of the house. After all, they are going to need jobs now that their parents can't supply them with what little they had.

mjohnson said:   BenH said:   
So - if the children can afford to pay the mortgage...then they can stay in the house.

However since you say they are adults and have no assets or income - they are no better than squatters at this point.
What is wrong with these adult children that they have been living with their unemployed parents with no jobs?
Does apathy and entitlement run in the family?


That was my impression as well, as long as they continue to pay the mortgage, they should be fine.

From what I am told, they have enough income to continue to pay the mortgage (again, which is more like $300 per month and likely interest only). I don't know the family that well aside from my friend (who is a sibling of the adult children...but has a normal job and house, etc).


mjohnson said: 7. Homeowners two children have been living in the home for the past 10 years and have no material assets or income.

Which is it? Are they selling enough weed to cover the mortgage payment every month or not?

tjguitar85 said:   mjohnson said:   BenH said:   
So - if the children can afford to pay the mortgage...then they can stay in the house.

However since you say they are adults and have no assets or income - they are no better than squatters at this point.
What is wrong with these adult children that they have been living with their unemployed parents with no jobs?
Does apathy and entitlement run in the family?


That was my impression as well, as long as they continue to pay the mortgage, they should be fine.

From what I am told, they have enough income to continue to pay the mortgage (again, which is more like $300 per month and likely interest only). I don't know the family that well aside from my friend (who is a sibling of the adult children...but has a normal job and house, etc).



If your friend is their sibling, you would think that (s)he would inherit a portion of the house.

If the house is underwater, there's nothing to inherit.

But that's the one thing going for the siblings - if the house is underwater and the payments keep coming in, the lender is more likely to just look the other way. If they could get their money back right away, you can be sure they would foreclose (to keep the house, one of them would need to buy it and take out their own mortgage).

dbond79 said:   mjohnson said:   BenH said:   
So - if the children can afford to pay the mortgage...then they can stay in the house.

However since you say they are adults and have no assets or income - they are no better than squatters at this point.
What is wrong with these adult children that they have been living with their unemployed parents with no jobs?
Does apathy and entitlement run in the family?


That was my impression as well, as long as they continue to pay the mortgage, they should be fine.

From what I am told, they have enough income to continue to pay the mortgage (again, which is more like $300 per month and likely interest only). I don't know the family that well aside from my friend (who is a sibling of the adult children...but has a normal job and house, etc).


mjohnson said: 7. Homeowners two children have been living in the home for the past 10 years and have no material assets or income.

Which is it? Are they selling enough weed to cover the mortgage payment every month or not?


Mom's social security check?

I'd think they'd get evicted & evicted faster (than the bank if they stop mortgage payments) if they don't pay the 10k property taxes.

Glitch99 said:   dbond79 said:   Which is it? Are they selling enough weed to cover the mortgage payment every month or not?Mom's social security check?The OP is writing the next episode of Shameless.

OP, what is your role in this whole situation? Did they ask you for advice? Does your word have any bearing?

AcidSpectrum said:   OP, what is your role in this whole situation? Did they ask you for advice? Does your word have any bearing?

My friend asked me a basic Q of what's the worst that could happen and what should they do. My friend is worried about doing something illegal/fraudulent/etc by not notifying the bank. If there is some legal obligation (which I might suggest talking to an attorney) for them to notify the bank, then that's what will happen.

If there is not any legal obligation to notify the bank, my guess is the adult children continue to pay the mortgage and live in the house. While my actual suggestions would be for the adult children to get jobs, move out, pay rent, notify the bank, etc, etc...if that's not the practical actions of the adult children, there is not much I can do but try and provide advice given what I am told the actions would be.

I don't know how the adult children make money (they are older so might be on SS by now, or unemployment, etc.).

My advice holds weight with my friend, who would end up being the one notifying the bank anyway. As for telling my friend to have their siblings get jobs, go rent, etc...they think the same thing, unfortunately it's not realistic...apparently.

You can find some articles online like this one:

http://homeguides.sfgate.com/tell-mortgage-company-person-deceas...

Best I can tell, you aren't obligated to tell the bank anything. They may find out on their own however.

As I said above, it sounds like the best situation is to keep paying the mortgage. As long as they are paying the mortgage, taxes, utilities, etc... it is unlikely anyone is coming after them - for a good while at least.

However, it is likely that day will come - might be 6 months, might be 3 years....they need to start preparing their budget for when they have to go.

However, as these people obviously don't give a crap about their lives, I'm not sure why you are wasting time investigating...and I'm not really sure why I wasted time responding

The adult children don't have a contract with the bank, so they are not legally obligated to do anything.

The funeral home will notify SSA about the person passing, and the bank might find out that way somehow. They could bury their parent in the yard to prevent this.

Things you learn on TV

zapjb said:   I'd think they'd get evicted & evicted faster (than the bank if they stop mortgage payments) if they don't pay the 10k property taxes.

This. The mortgage is a red herring. It sounds like there is no way they can pay the property tax. May as well not pay the mortgage either and keep living there for free until the county forecloses.

Where is this in California that the house isn't worth 85,000 dollars. I suggest your friend get another opinion as to the value. Sounds like (s)he is the likely responsible party to handle the estate. Close accounts, file final taxes, distribute whatever there is. Also check those taxes. Tax liens etc. with the county. I lived in Ca. and taxes on an 85.000 dollar property would take 4 or 5 years to reach 10,000. Tax sale should have been done before that.

The sheriff is going to evict them before the bank. If they do no pay the property tax the county will auction off the place. The new owners will get the sheriff to force them out. I'm surprised there is 10K in back taxes on such a cheap property; it must be for years. California must do things differently because where I live taxes are due in January and the tax auction is in October.

xpaphil said:   Where is this in California that the house isn't worth 85,000 dollars.Check the map. CA is pretty wide. There's the desert, the cows, etc. Plenty of spaces nobody wants to live in or near.

Kdogg said:   The sheriff is going to evict them before the bank. If they do no pay the property tax the county will auction off the place. The new owners will get the sheriff to force them out. I'm surprised there is 10K in back taxes on such a cheap property; it must be for years. California must do things differently because where I live taxes are due in January and the tax auction is in October.

Once they're 3 years overdue here in Michigan, you might find your property in the Department of Natural Resources' tax sale book.

taxmantoo said:   Kdogg said:   The sheriff is going to evict them before the bank. If they do no pay the property tax the county will auction off the place. The new owners will get the sheriff to force them out. I'm surprised there is 10K in back taxes on such a cheap property; it must be for years. California must do things differently because where I live taxes are due in January and the tax auction is in October.

Once they're 3 years overdue here in Michigan, you might find your property in the Department of Natural Resources' tax sale book.


Three years! Wow. Tax sales here are 9 months after the due date. The deadbeats do get a year to pay the new buyer back plus interest to reclaim the property but the county get's it money in less that a year.

Kdogg said:   
Three years! Wow. Tax sales here are 9 months after the due date. The deadbeats do get a year to pay the new buyer back plus interest to reclaim the property but the county get's it money in less that a year.


I'm not sure about our post sale redemption period, it might only be six months.
I had a friend whose attorney advised him to let vacant land go because 3-4 years' taxes plus interest (1% per month non-compounding) were more than the property was worth. Tax rate was probably about 5% back then. Says something about the accuracy of the tax assessment, doesn't it?

tjguitar85 said:   lonestarguy said:   Are they adults acting like children, or real children less than 18 years old? Sounds like the original owner is a dead-beat borrowing more money than what they even paid for the house. If these are adult offspring they need to notifiy the bank, move out and earn a living. Seriously, there are jobs out there - I see help wanted signs all everywhere around here lately.

Where? What kinds of businesses? I will move there right away. No jobs to be had around here.


Oil field truck drivers, deck hands(no experience needed just a clean drug test)on drilling rigs, highway maintenance workers, field helpers. Most all require considerable physical labor but pay $50k plus.

Most of the time, the bank will pay the back taxes before there is a tax auction to protect their interest.



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