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Deceased Customers with Outstanding Loans

Question: 
When a borrower is deceased, family members continue to make payment and the account has an escrow account: 1. Is the bank still obligated to continue​ paying taxes and insurance from the escrow account? 2. If the loan has PMI​ does the company need to be notified? If the loan does not have an escrow account: 1. ​If the loan payments are still​ being paid by a family member and the insurance is being paid but left in the deceased person's name​,​ ​w​hat avenue should the bank take?
Answer: 

by Randy Carey:

1. Is the bank still obligated to continue​ paying taxes and insurance from the escrow account?

Yes - I'm not sure why you would want to jeopardize your collateral by not paying either the taxes or insurance.

2. If the loan has PMI​ does the company need to be notified?

You would have to consult your PMI insurance agreement to answer that question.

If the loan does not have an escrow account:

1. ​If the loan payments are still​ being paid by a family member and the insurance is being paid but left in the deceased person's name​,​ ​w​hat avenue should the bank take?

You need to contact the family and inform them that they need to make arrangements to get the estate settled. Also be aware of the upcoming changes in the RESPA servicing requirement when you are dealing with "successors in interest". Also, refer to this bulletin. Your servicing policies should already address this situation:

http://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bullet...

Answer: 

by Ken Golliher:

From the perspective of handling a decedent's estate, it's understandable and, perhaps, appreciated that family members want to keep the loan current. However, it may be an incredibly foolish thing for them to do; e.g. if Mom's still living in the house and I don't want a past due loan to become an issue, I'll loan Dad's estate the money to make the payments rather than paying them out of my own pocket.

You need a sit down

First published on 03/26/2017

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