Power of Sale Mortgages: Recent NH Supreme Court Decision Raises Concerns for Estate Plans

By Cooley A. Arroyo

The New Hampshire Supreme Court recently issued a decision in In re Estate of Muriel R. Mills that clarifies the authority of a mortgage lender to foreclose on property after the death of the borrower. The Court addressed two issues; of particular importance to New Hampshire residents is the Court’s holding regarding “power of sale mortgages.”

In 2006, Muriel R. Mills granted a “home equity conversion mortgage” to Financial Freedom Senior Funding Corporation (“Financial Freedom”). The terms of the mortgage permitted Financial Freedom to foreclose upon her property under certain circumstances, including the death of Ms. Mills. It further provided that the “Lender may enforce the debt only through the sale of the Property.”

In New Hampshire, the executor of an estate informs known creditors of the decedent’s death and notifies them that a probate estate has been opened. The opening of the probate estate triggers certain timeframes within which creditors must file claims against the estate.

In Mills, proper notice was provided to Financial Freedom, but Financial Freedom did not file a notice of claim in the prescribed time period. Several months later, Financial Freedom attempted to foreclose on the property under the provisions provided in the mortgage.

The case was ultimately heard by the New Hampshire Supreme Court which distinguished “power of sale mortgages” from other creditor claims that are subject to the notice requirements described above. The Court held that a power of sale mortgage proceeds without any court proceedings and is actually done “instead of [ ] bringing a suit . . .”; the mortgage holder simply gives notices and carries out the acts associated with the power of sale.

Implications for New Hampshire Estates

This case presents an additional consideration for the administration of estates that are encumbered by a power of sale mortgage. Attorneys and clients are encouraged to contact me or any of the other Cleveland, Waters and Bass estate planning attorneys to discuss this ruling in more detail and determine how it might impact property that is currently subject to such a mortgage.

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