What happens when your parents die and you discover an unpaid home equity loan with an extremely high interest rate? This person inherited a house, which is in probate, but also discovered what looks like a 30-year home equity loan that carries such a high interest rate that the loan balance is never paid down. She wants to know if a 30-year high interest rate home equity loan is legal? What can she do about finding out if the loan is real and if she must repay it?
Q: My mother died recently and her house is in probate. I’ve been paying off a home equity loan with a very high interest rate on her home. The original papers say the loan was taken out in 1988. There’s a letter I found that requests that my parents come in and sign off on the loan.
The bank was sold some years ago to one of the biggest banks in the country. I don’t think my parents’ signed off on the loan. I’m paying on an $18,000 loan balance that doesn’t go down because of how high the interest rate is.
My mother started getting bills on this loan after the house mortgage was paid off. A 30-year home equity loan seems quite strange to me. Something is wrong! Do I actually owe this loan?
A: We’re sorry for your loss and for how difficult it can be to go through probate while mourning the loss of your mother.
In terms of the loan, you’ll need to do more research. We agree with you that we have not heard of 30-year home equity loans, but that doesn’t mean that your parents didn’t decide to extend the term of the loan over and over again.
If you are the executor of the will, and have the powers given to you by the probate court, you can call the home equity lender and request that it send you copies of the note and mortgage for the loan in question. You can then see when the loan was taken out, what the terms were of the loan and see if the signature matches your parents’ signature.
We think you would have heard something from your parents about the loan if they didn’t recognize it or how onerous the payment was, but in case your parents weren’t familiar with business terms and someone took advantage of them, you’ll have to first understand the loan terms and take it from there. We don’t know if you found any loan statements or your parents’ tax returns. You might get some additional information about the loan there.
We suspect that you might have seen correspondence on an old loan that your parents had on the home and that your parents took out new loans or renewed the old loan. We agree that a high interest loan is best paid off the sooner the better, but we can’t tell you if your parents took out that loan for some home improvement where the home improvement provider put on an addition or renovated the home in exchange for the loan.
Sometimes these home improvement companies give paperwork to the homeowners for the work they will do and finance that work. The financing terms are usually much higher than what you might get if you went straight to a lender. Furthermore, these loans can and may be sold off and end up being serviced by others, including your big box lender.
If the lender is one of the biggest banks in the country, it’s probably regulated by the Office of the Comptroller of the Currency (OCC). The OCC maintains a website called HelpWithMyBank.gov. You can find more information on that website about the banks that are regulated and even file a complaint about the loan if you can’t get anyone at the bank to talk with you about it.
Finally, you can also contact your local recorder of deeds or other office that handles the filing or recording of documents and see if they can give you a copy of the mortgage on file. Some of these documents are online and you can view them for free from your computer. If you find the document, you might get a better sense of the date your parents took out the mortgage and you might see if the signature on the document matches your parents’ signature. If it does not, it’s possible that your mother was the victim of identity theft or fraud and you will have to take a different path from there.
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