can imagine, my mortgage company is going to be pretty upset. They’re going to threaten to foreclose on the home, but I won’t care: I don’t own the home anymore. As far as I’m concerned, foreclosure is an empty threat. As a result, almost all mortgages have (usually in very small print) special language that says if the borrower sells or gives away the home, then the entire mortgage becomes immediately due. Sure enough, although Sanford didn’t know it, that language was in his mortgage. So his mortgage company told him that if he gave his house to his son, then he would have to pay off the entire loan, i.e. 10 more years worth of payments, right away. Sanford couldn’t afford that. And he certainly didn’t think it was fair because he was promising that he was going to continue to make the regular payments for the next 10 years as he originally agreed to do when he took out the mortgage. It turns out that the mortgage company’s threat wasn’t even legal. There is a federal law that says there are some times when a mortgage company, no matter what the actual mortgage paperwork says, can’t accelerate the loan and demand full payment right away. One of those times is when a borrower dies and the home is inherited by his heirs. Other times when the mortgage company can’t demand full payment right away is when a borrower gives the home to a spouse or child or puts the home in a particular kind of trust. In Sanford’s case, even though his mortgage specifically says he will have to pay off his loan right away in full if he gives away his home, because he is giving the home to his son, he is protected by federal law. As long as Sanford continues to make the monthly mortgage payments, the mortgage company won’t be able to foreclose or prevent Sanford from making the gift of the home to his son. Just because Sanford can do it, doesn’t mean he should; there could be some bad tax consequences for Sanford’s son and things could become real tricky for Sanford should he need to go into a nursing home. If you find yourself in a situation like Sanford’s, it makes good sense to talk to an expert before making a big decision. There are times when it’s better to be safe rather than sorry. Lee Aronson is a Shreveport attorney with Lineage Law, LLC, an estate and business planning law firm serving clients throughout Louisiana.
The Best Of Times
March 2015
21