What happens if the mortgage company refuses to let me assume the mortgage after probate? – North Carolina

Short Answer

In North Carolina, you generally cannot force a lender to approve a loan assumption after the homeowner dies. If the lender refuses, payments can still be made and the property may be kept or sold “subject to” the existing mortgage. The personal representative (PR) can seek court authority to refinance, mortgage, or sell the home to satisfy debts. If payments stop, the lender can start foreclosure, and the PR can take control of the property and address the occupant’s status.

Understanding the Problem

In North Carolina probate, can the only surviving child make a lender allow a loan assumption on a deceased parent’s mortgaged home after opening the estate, especially where a close friend still lives in the home?

Apply the Law

Under North Carolina law, real estate passes at death to heirs or devisees, but it remains subject to valid liens like a mortgage. The lender’s approval is typically required for a formal assumption. A qualified personal representative (PR) may take possession of estate real property when doing so serves the estate’s best interests, can eject occupants if necessary, and may petition the Clerk of Superior Court to lease, mortgage, or sell the real property to address estate debts and administration. Within two years of death, deeds, leases, or mortgages by heirs/devisees have special rules to protect creditors and the estate. If payments lapse, foreclosure can proceed under Chapter 45’s power-of-sale process.

Key Requirements

• Authority to act: A PR must be appointed to deal with the lender and the property on behalf of the estate.
• Property passes subject to the lien: Heirs/devisees receive title subject to the mortgage; the lender remains a secured creditor.
• Control of the property: The PR may take possession and, if needed, remove occupants to protect the estate’s interests.
• Court approval for financing: If an assumption is denied, the PR can seek an order to mortgage or sell the property to satisfy debts.
• Two-year rule for heir transactions: Sales, leases, or mortgages by heirs/devisees within two years require compliance so they are not void as to creditors and the PR.
• Foreclosure risk: If payments stop, the lender may begin a power-of-sale foreclosure after statutory notice and hearing.

What the Statutes Say

• North Carolina Gen. Stat. § 28A-13-3 (PR powers over real property) – PR may take possession, protect, and, in proper proceedings, eject occupants.
• North Carolina Gen. Stat. § 28A-17-11 (Order to lease or mortgage) – Clerk may authorize the PR to lease or mortgage estate real property.
• North Carolina Gen. Stat. § 28A-17-12 (Heir/devisee transfers within two years) – Sets validity rules for heir/devisee sales, leases, or mortgages as to creditors and the PR.
• North Carolina Gen. Stat. § 45-21.16 (Power-of-sale foreclosure notice) – Requires a noticed hearing before a foreclosure sale.

Analysis

Apply the Rule to the Facts: Because there has been no formal probate, you need appointment as PR to speak with the lender and manage the house. The home passes subject to the mortgage, so the lender remains secured even if an assumption is denied. With a relative planning to stop payments and a friend living there, the PR can take possession and either formalize the friend’s occupancy or proceed with removal if needed. If disability benefits are owed to the estate, the PR can collect them and use funds to cure arrears or support a refinance, court-approved mortgage, or sale.

Process & Timing

1. Who files: The surviving child (or other eligible person) to become PR. Where: Clerk of Superior Court in the North Carolina county where the decedent resided. What: File the will for probate and apply for Letters using AOC forms such as “Application for Probate and Letters” (AOC‑E‑201) or, if no executor, “Application for Letters of Administration” (AOC‑E‑202). When: As soon as possible to communicate with the lender and avoid default.
2. After qualification, notify the lender with a death certificate and your Letters; keep payments current; publish notice to creditors; evaluate arrears and gather assets (including any unpaid disability benefits) to stabilize the loan.
3. If the lender refuses assumption, decide whether to (a) refinance, (b) petition the Clerk to authorize a mortgage or sale, or (c) sell “subject to” rules that protect creditors within two years. Resolve the friend’s occupancy and complete the estate’s accounting to close.

Exceptions & Pitfalls

• Within two years of death, a deed, lease, or mortgage by heirs/devisees may be void as to creditors and the PR unless statutory conditions are met; have the PR join and ensure creditor notice has run.
• Without PR appointment, most servicers will not discuss the loan or accept assumption/relief requests; get Letters before negotiating.
• Occupant issues: if the friend is a tenant, use landlord‑tenant procedures; if not, the PR may seek ejectment authority through the estate proceeding.
• Insurance and taxes: lapses can trigger default or loss; the PR should secure and maintain coverage and address taxes promptly.

Talk to a Probate Attorney

If you’re dealing with a lender refusing a mortgage assumption after a loved one’s death, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.