[WSBAPT] Inherited mortgage

[Eric Nelsen]

Agree with John. Personal obligation to pay a debt is determined by who signed the Promissory Note. A mortgage (Deed of Trust) is just an agreement to let the bank seize the house if the Note isn't paid.

If mother is the only signer of the Note, then B and S have no personal liability for the debt no matter what. Their inherited ownership of the house is subject to the lender's mortgage and right to foreclose for non-payment, so B and S have practical reasons to pay the debt they aren't liable for...but no matter what B and S do with transfers of ownership, they aren't liable to lender on the original debt.

If B gift-quitclaims to S, there is still no need for indemnity that I can see, because B remains free of personal obligation on the Note.

Under that scenario, I think there is no REET due either. See WAC 458-61A-103(2)<http://apps.leg.wa.gov/wac/default.aspx?cite=458-61A-103>.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of John J. Sullivan
Sent: Wednesday, October 11, 2017 2:41 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] Inherited mortgage

So B and S are both mortgagors on the existing mortgage? Or was the mortgage taken out by the decedent they inherited the property from? If the latter, neither is personally obligated on the underlying note.

If the former, B remains liable directly to lender under the promissory note. He would have to secure a release from the lender, which is rarely granted without S refinancing and qualifying separately.

Secure indemnification agreement with second position deed of trust? If brother is relieved of liability at time of transfer there might be consideration for REET purposes.

John J. Sullivan

Sent from my iPhone

On Oct 11, 2017, at 2:27 PM, Lisa E Schuchman <lisa at lisaschuchman.com<mailto:lisa at lisaschuchman.com>> wrote:
Sister (S) and brother (B), both adults, inherited a house from their mother on her death.  We’re getting ready to close the probate and transfer title to them.  They understand that they can keep the existing mortgage without additional need to qualify.  But if B later gifts his share of the house to S, can B disentangle himself from the mortgage obligation and leave S fully liable?  I know that Garn-St. Germain wouldn’t apply to that transfer, but since S is already in the place of the mortgagor can B get out of it?  Does anyone have a better suggestion?

Thanks.

Lisa E. Schuchman
206-960-4212
www.lisaschuchman.com<http://www.lisaschuchman.com/>

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