Loan Under Water, Borrower Passed Away, What to Do Now?

[beachbirdie]

My mom has a 24-foot Itasca Spirit, 2006, she bought at an RV show.  She has a $54,000 loan on it, but in looking around trying to value it for her estate I find these are now going in the range of $30,000.

A friend told me that RV loans often have a mortgage insurance built into them.  Does anyone know anything about this?  I know if we let it go back to the bank in a repo mom's estate will still be on the hook for somewhere between 15K and 20K.  Ouch!

Hopefully I'll find the loan papers sometime soon and I can answer the question for myself...but for now, we haven't informed the bank of her very recent passing.

Thanks...

bb

 

[Kim (skyking4ar2) Bertram]

Sorry to hear about your mother. It is not pleasant to manage the loss and the business details of the estate in the same breath; we had a similar situation last year.

It is possible she had a credit life policy (similar to mortgage insurance in some ways) on the motorhome and that would have been included in the loan disclosure papers and on the contract. Hopefully, you will find both and  solve that part of the puzzle.

Not everyone takes out credit life, and by law, it cannot be a requirement for a loan. You should be able to get a copy of the paperwork from the lender and I would not be reluctant to contact them. Even if she did not have the insurance, as long as the payments stay current, you should not run into a lot of flack while the estate is being settled.

Good luck with an unpleasant circumstance.

As a caveat, though, states have different laws about inheritance and you might do well to speak with an attorney if you are concerned about a financial hit on the estate, especially if that affects you directly.

 

[Wolf Pack Fan]

Also sorry to hear of your mothers passing.  My condolences.

You really need to find out whether her note had insurance.  If it did, it's a simple matter of providing a death certificate to the lender.  If she did not have credit life insurance you've got options.  You could contact the lender and tell them "Come get it".  They'll do it, but they're not crazy about it because now they're stuck with it and they'll not only take a loss because the balance is higher than market value, but they'll take a loss trying to get rid of it also.  You're also in a fairly strong position to negotiate a buy on it, if your credit worthiness satisfies their requirements.  You could make them an offer of below book value and they would consider it.  Then again you could just keep paying on it for the time and keep it from becoming a part of the turmoil you're already having to deal with.

Hope it all works out well for you. 

 

[odie1234]

State laws vary on executor responsibilities, but when my parent died, the lawyer assisting me settle the estate was quite adamant that the bank with loans on Dad's stuff be notified quickly. He said there were penalties to the executor if they were not. In our case, the lenders were quite helpful and understanding. In one case, one of my siblings took possession of the property (and the obligation). The estate paid the loan on the boat and we then sold it.

IMO, estate settlement is not something that should be done without the aid of a lawyer. I have been executor four times, and each settlement was more complex than I would have wanted to do without aid. Good luck.

 

[Gary RV_Wizard]

It is quite common for an RV loan to be "under water". The usual procedure is to arrange a short sale and then negotiate with the lender on the remaining balance. You can make an offer of a partial payment in satisfaction of the remainder. It is not even terribly unusual for the lender to forgive the entire balance if they see little possibility of collecting. Obviously the size of your Mom's estate would have a bearing on that.

So the thing to do is to try to find a buyer while simultaneously opening a discussion with the lender about a short sale. You will need their concurrence to get a clear title to sell without first making a full payoff. They can also provide a copy of the loan agreement if you can't find hers.

 

[John From Detroit]

You need to find the original loan documents and/or the monthly "Bill" from the loan company.. MANY times a borrower on a large loan is asked to take out "Borrowers insurance" basically (Depending on considerations) this is either a life or life'/disability policy that pays off the loan in case of death.

IF, she had such a policy (IT may have been part of the loan, in which case it **SHOULD** appear as  a line item on the payment distribution part of the monthly bill/statement) or it may have been "External" to the loan itself (Independent from an agent).

 

[beachbirdie]

Thank you all for your kind condolences and very helpful replies.  I am sorry, I do not see an option for "multi-quote", I'll address you all in one post.

Mom did have most of her stuff in a trust, so we are working with her lawyer for termination and distribution.  The RV was not in the trust, so we are at this point keeping the payments current while we figure out the best option for that.  I am away from mom's loan documents, I guess I won't be afraid to call the lender and ask...I don't get an itemized statement.

It has been most helpful to learn how common the "upside down" situation is with RVs.  All of your input gives me confidence that we may have some workable options to keep the financial hit somewhat reasonable, and knowledge enough that we won't get taken "to the cleaners".

Thanks again, very much.

bb 

 

[wayzgoose]

BeachBirdie,
I've suffered two family losses this month as well and express my sincere condolences.

When you are dealing with the family stress and the emotional loss of someone near, it is very difficult to deal with mundane financial issues. Definitely seek counsel. You may find that if the bank took the RV as collateral for the loan, then the RV is all they have recourse to. Rather than becoming owners of the RV, they may be willing to settle for current value as that is all they would get if they took it.

Best wishes,
Wayzgoose