The mortgage on the condo is greater than its value. I don't have the money to pay the mortgage when the condo passes to me upon my mother's death. Since I'm on the warranty deed (not the mortgage note) can the mortgage company come after me if I decide not to pay the mortgage and "walk away"?
Foreclosure paperwork or lawsuit must be served on all owners of the property. When the person who's name was on the mortgage is dead, then the foreclosure action will have to either find out whom is the personal representative or executor of the estate OR the heirs to serve them the lawsuit.
BUT what can get sticky in this is whether the property was a "homestead" at the time of death as some states probate laws are set up that the personal representative or executor cannot be served but only the heirs can. So all the possible heirs have to be joined as defendants in the foreclosure. If heir(s) are left out, then the foreclosure could be void and there could be a bee's nest of issues with getting a clear title.
Some families just don't deal with probate or take time to get around to open. If there are no real assets or a will, it becomes a "why bother" kind of thing. Personally, I saw a lot of heartache after Hurricane Katrina with families who never did probate and continued to use the "family" home for decades and then had no way to get rebuilding grants or loans or insurance as they could not establish ownership or get a clean title. But I digress......
If your mom died without a will, then she died "intestate", which is usually a whole set of other issues to deal with that depend on each state's laws and how property is acceded to the state. They have to find out who are the intestate heirs.
If there is a foreclosure out there, and it seems that probate isn't getting opened for the deceased, then the lender can petition the court to appoint an attorney to "find" all the possible heirs (the defendants) in a timely manner so the foreclosure can proceed, the title transferred and property sold. It's not about trying to get you to pay your mom's mortgage, it's about establishing a clean valid title. This sounds like what is happening.
As long as you or your sister didn't cosign for the mortgage, you can't be held for payment. If you all did however, loan your mom any $ or pay for things for the property, can show receipts, etc. then you can do your own claim or lien against the estate. If successful, the $ would come from the sale of the home which means less for the lender. This is best done by a probate attorney. Good luck.
The bank is asking the judge to let them appoint a special representative of the estate. I just don't know if adding heirs as defendants is routine and if this will affect our credit. I don't understand why id my mom was the only person on the mortgage I would be responsible for it. It doesn't sound logical that I would have to respond for someone else's loan.
You have a # of issues here and beyond the mortgage...
1. Was mom competent at the time to sign over assets?
I ask this because if they did a quit claim deed for this, there can be problems as she did not own the property outright at the time (because she had an encumbrance on it by having a mortgage). So did she realize that? Even if they went to the courthouse and filed the QC there is no guaranteed ownership of the property with a QC. You can only get that by doing a warranty deed which needs a release of the deed of trust from the mortgage company to happen.
2. What does your mom's mortgage contract read about death of holder?
Mortgage company, auto dealership, credit card companies don't care who pays monthly. But paying the mortgage doesn't mean they own the property or even have a claim on the property. Most mortgage documents have a “due on transfer” clause. That means the old mortgage HAS TO BE paid off in full in order to transfer ownership. If it’s not being paid off in full and instead mortgage is being transferred to you, the lender can require you to qualify for the remainder of the mortgage, have the house appraised & other standard real estate items done when selling a home. If your credit history is iffy, this can be a problem. The house appraisal can often be a problem as so many, many homes are negative-equity to their mortgage (in other words the house is worth less than mortgage).
3. Did mom have a will and who is the executor for her estate and have they opened probate? If so, to whom did she name in the will for her properties. Was it the sibling who "owns" the properties now? The other children could challenge the transfer if this isn't the case.
Again all these things are sticky, you need an estate attorney.
Lots of older issued RM are now negative equity, like your mom's house is. The 2 big players in RM were Bank of American and Wells Fargo and they both got out of the RM game because the huge negative equity losses. You are not personally responsible for anything on the RM or any of your mom's debt, so this should not affect your credit rating. Unless you cosigned. Which hopefully you did not do?
More than 50% negative equity. Wow, there is probably no rebounding at that big of a %. If it were me, I'd put the keys with a tag of the address and mortgage account # into an envelope and Fed Ex them to the mortgage holder (so you have proof of doing this) and just walk away from it. Don't spend another cent on the house. If you mom is elderly and just on Social Security, there is nothing a debtor can attach for $ either. Could get ugly but really what can they do.....nothing.
You mention being her legal heir. So are you the one named to be executor as per her will after she dies? If that's the case, then as executor, you have to go to probate to deal with her estate. If the house still is an issue when that happens, then the house and it's debt are a part of her estate. If there are other assets in her estate (savings account, securities, etc), then you will have to liquidate those to pay off her debts in their order of importance as per the death or probate laws in her state. Funeral expenses usually come first then medical then mortgage. You really need a probate attorney to work with you on doing all this. Probate even when it's simple is pretty specific (rather than complicated) but requires notifications and filings to be done in a set timeframe and a good probate attorney is just worth it. Good luck and keep a sense of humor.
If you can't re-finance or keep pay the original loan, then try to sell the house as quickly as possible. Do not do any repairs as there are enough Buyers out there who want houses to flip. Get an appraisal from a licensed Appraisal to get an idea of how much the house is worth. Call a Realtor, and make sure the house is being sold "as is".
Now since your names were already on the Deed when your Mom passed, you might need to pay capital gains taxes when you sell, if the value of the house has gone up a lot since when your Mom first bought the house. That's the down size of putting the adult children's names on the Deed while a parent is still alive.
Otherwise, if you had inherited the house via a Will, then the cost bases of the house would be the day your received the house, not back when Mom had bought the house.
I know this becomes a crazy maze, and can get complex. And some elders think if they leave the house to an adult child that the mortgage goes away upon death. As we all know, that isn't how it works.