If an adult child lives with theri parents, and their parents die, can they legally live there? I ask because this is a real life situation. The house is not paid for, the parent had a loan out, and stopped paying it before they died, its been two years since they passed.
Foreclosure notices had come in the mail for awhile, but then they were dismissed without prejudice.
Yes, it’s squatting. The house is part of the parent’s estate and passes, subject to the mortgage, to the executor/legal personal representative, who needs to deal with the mortgagee and then pass the house (if it still forms part of the estate) to the person entitled (who may or may not be the child living there).
In the meantime the adult child can live in the house with the executor’s permission. In deciding whether to give permission the executor should have regard to the interests of the person/people ultimately entitled to the house. This may mean charging rent (though if the people entitled to the house are family members/otherwise kindly disposed they might be prepared to let this go for a time).
The executor also has the responsibily of discharging the deceased’s debts out of the assets of the estate. This includes the debt to the mortgagee - another reason why the executor may have to charge rent, to generate income with which to service the debt.
Assumedly the mortgage lender has a first position lien against the house and a valid claim against the estate. Why can’t the bank simply foreclose if no one is making payments? Why were the foreclosure notices “dismissed without prejudice”? On what basis where these being “dismissed”?
The scenario as described doesn’t seem to make sense.
I think that “dismissed without prejudice” in this case means “thrown unopened into the trash by the squatter.”
There’s been quite a rash of foreclosures being ‘dismissed without prejudice’ of late, usually due to faulty paperwork chains on the part of a long string of lenders/servicers/etc. The ‘without prejudice’ part means that the court said ‘come back when you’ve got all your documentation in order and we’ll talk’.
Upshot: the squatters have gotten lucky in that there was some sort of screw-up by some bank or lawyer. Their luck will run out eventually–someone will dig the right bit of paperwork out of a vault somewhere, the bank will successfully prove their lien, and they’ll be out on the street. It may take a while, because (again) there are so many of these situations in play, and only so many lawyers and clerks to work out the details. Until that day comes, there’s nobody with the legal authority to throw them out. (But they should be careful about going on vacation, lest another squatter move in while they’re gone–they probably don’t have any legal authority to throw someone else out, either …)
It appears that in their go-go rush to sign up mortgages to be sliced and diced into “mortgage-based securities” [sic], a lot of lenders didn’t do their paperwork correctly, meaning that even when the home-owner is in default, the bank can’t produce the paperwork to show they have the right to foreclose. Several big banks in the US have announced moratoriums on mortgage foreclosures, while they try to figure out what to do.
Here’s a couple of recent threads on it:
The so called squatter is the only legal heir of the parents. The dismissal of foreclosure came in the mail for both parents, both deceased at the time.
“Dismissed without prejudice”, as others have pointed out, means the bank can try again, and the fact that they failed the first time will not be held against them.
The squatter may be the heir, but he/she doesn’t own the house yet, even subject to the mortgage. An executor has to be appointed and deal with the affairs of the estate, and this includes settling the debts of the deceased. So, even if there is a problem with the mortgage over the house that the bank can’t rectify, if the bank can get so far as showing that they are owed money by the deceased (on foot of a loan which which now turns out to be unsecured) the executor is under a duty to use the assets of the estate to repay that loan, and only transfer the residue to the heirs.
Since this is about a specific legal situation, it is better suited for IMHO than GQ.
Colibri
General Questions Moderator
Sorry, I tried to get the right forum.