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I am the administrator of an estate in upstate New York. Unfortunately, there is effectively no money in the estate which would allow me to hire a lawyer, so I'm hoping you folks can help.

By the time I found out about the passing, the house had lain fallow for six months. There were break-ins, burst pipes, the cops had been called multiple times but openly refused to investigate (we actually had a voicemail where the police officer explained that they didn't bother investigating reports of looting for that property anymore) which also meant there was no way to file reports with the police to report the stolen goods because they outright refused to have anything to do with the place.

The house had been refinanced six months before the passing. By the time I came on the scene, the house was in ruins and the refinancers were going crazy from lack of feeding- er, payment. I tried to ask for a stay from them, explaining the circumstances, and that I was trying to get the various paperwork and such in order. They conveniently lost almost every single document I sent them at their request, and when they did manage to track them down, would dispute them.

Meanwhile, the insurance company (as an aside, we were more assuredly not in good hands, they made the whole process into a nightmare and if I had the money I would sue them for fraud) eventually paid out a check for the personal items and a check for the damage to the house. The former went into the estate account, the latter went to the mortgage company. A week before that resolution, the lenders announced that they were foreclosing on the property.

An hour ago, I was served with the foreclosure paperwork. I don't particularly see anything that I could do to stop the foreclosure (in part because I'm not really sure what I could do, and I also live several states away so showing up in court would be difficult), and none of the heirs particularly wants the place, especially now, so there doesn't seem much point in fighting it.

So. The money from the insurance company to pay for repairs for the house is a substantial percentage of the mortgage on the house ($45,000 on a mortgage of ~$110,000). Assuming the house is foreclosed upon and presumably sold, what happens to the money? Can the loan company do what they want with the money, use it to fix up the house? Or can they short sale it and pocket the difference? What are my options here? Is the estate entitled to any money left after selling the house assuming the sale price plus the insurance money is above the mortgage loan balance?

  • Minor question: Did the deceased reside at the property in question? I.e. did they live there at the time they died? – sharur Oct 6 '17 at 20:14
  • @sharur Yes. The body was found by the postal worker and a cop busted in the door to find him dead in his easy chair. – Broklynite Oct 6 '17 at 21:37
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IANAL. I am not your lawyer. The following is not legal advice.

The insurance company, regardless of how you feel about their process, has it appears, to have discharged their duties, namely they have paid out two separate claims. The personal property claim has been paid to the estate as the beneficiary, while the property claim has been paid out with the mortgage company as the beneficiary.

The mortgage company seems, to me (disclaimer, I work at a financial institution, albeit in an IT role), to also be reasonable. Six months is an extremely long time without contact or payment (where I work, the loss mitigation department is sent all loans that are 3 months delinquent); the fact that you, the estate executor were not aware of the passing of the debtor is of no consequence. Also, many loans contain clauses that allow the lender to accelerate the loan (i.e. demand "immediate" payment of the whole outstanding balance). So they've started foreclosure proceedings, probably about 3 months ago.

As for the foreclosure proceedings: The received $45,000 will be applied to the loan. The property (not just the house, but the entire lot) will be sold at public auction, as all foreclosed houses are in the state of New York. Proceeds from the sale of the house shall be applied to paying off the loan. If the proceeds exceed the outstanding mortgage amount, the estate will be sent the remaining proceeds. If the proceeds are less than the remaining amount, the estate is retains (i.e. owes) the remaining debt.

EDIT: As an example of why the noting of jurisdiction is important on this stack-exchange, Nate Eldredge has informed me that in New York, it is possible for a judge to reduce the "remaining debt" of the estate by declaring that the sold house had a higher "fair market value" than it sold for.

  • I should say, the issues with the insurance company had nothing to do with the two checks and more to do with them emptying four dumpsters worth of personal property and claiming they had no knowledge of such a thing. Similarly, the mortgage company foreclosing is not unreasonable, the communication and the "losing paperwork" were shoddy. Thank you tho, this sounds like about what I figured. – Broklynite Oct 6 '17 at 21:44
  • Based on nolo.com/legal-encyclopedia/…, it looks like the owner (the estate) would not necessarily owe the difference between the sale proceeds and the debt; only up to the fair market value of the property, and only if the lender goes to court. – Nate Eldredge Oct 6 '17 at 22:34

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