The Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan has issued guidance explaining that a borrower’s death does not terminate a mortgage or the associated security. Mortgage obligations and rights to the pledged property pass to heirs who accept the estate. Those heirs become joint debtors, but each heir’s liability is limited to the value of the property inherited. The guidance develops the agency’s earlier explanation that mortgage debt enters the estate when no borrower life insurance applies or an insurer declines a claim. The mortgage remains in place until the secured obligations are fully discharged, and enforcement depends on the law, the loan and mortgage agreements, and the circumstances of each case. A borrower’s death alone does not give the bank an unconditional right to demand early repayment. During the general six-month period for accepting an inheritance, the bank should consider suspending the accrual of interest, penalties and other late-payment charges until the heirs are identified and accept the estate. Thereafter, payments continue under the existing agreements and schedule. If there are no eligible heirs or all heirs renounce the estate, the property becomes ownerless and transfers to municipal ownership under the applicable procedure, without extinguishing creditor claims. Co-borrowers remain liable to the extent specified in the loan agreement, while guarantees and sureties continue or terminate in accordance with the law and contract terms.

Original source