I can answer this question for my jurisdiction (Florida, USA), because I lived through it.
My Dad ("Alice") passed away in 2008, just as the housing crisis was starting to heat up.
What happened to the Mortgage?
My Dad had a will in place. It was an old will (from the 1980's), but never-the-less, a will. We had to provide paperwork to the court that my Mom had already passed away, and my oldest brother was living out-of-state (he would have been the executor, otherwise). With the proper paperwork, I became the Executor, and the property passed in to probate. At this point, the "Estate" was responsible for the house and the mortgage on it (meaning me, as I was the Executor).
We decided to sell the house, so we hired a realtor, and set an asking price about $40k over what was owed on it. As we waited for it to sell, I had to make monthly mortgage payments, and payments to the HOA (otherwise the HOA could put a lien on the property, making it more difficult to sell, should we find a buyer).
Is it Automatically Transferred?
In most jurisdictions, I would say not "automatic". I definitely had get an estate lawyer and file the proper legal paperwork with the local county courthouse. Some states have an easier probate process ("Summary Administration" in Florida), that eases the requirements for small estates.
Is Bob expected to pay it off all at once?
No, the mortgage holder was happy for me to make payments (out of other estate assets) in lieu of my Dad. The were earning interest, after all. This is probably true in most cases.
Can the House be Foreclosed on?
Yes. In our case, being 2008, we had a hard time selling the property. The asking price quickly went from $40k over what was owed, to $20k over, to $10k over, then to being equal to the mortgage value. Finally, I approached the bank about options. They suggested a "Deed in Lieu of Foreclosure" process. It was easier for us, and the bank had to pay less lawyers and such. Otherwise, a "Deed in Lieu" is effectively the same as a Foreclosure. At that point, we stopped making payments. Eventually, me and all my siblings (the "heirs") had to sign the proper paperwork giving the house over to the bank.
In our case, the bank did not pursue us (or rather, the Estate) for the difference between final (auction) sale price and the mortgage balance (it was an FHA loan, so the US Government wound up picking up the difference). From what I understand, this could have happened, and we would have wound up with basically nothing out of the Estate.
Can the Lender Force the Sale?
I can't give a definite answer on this, but it probably depends. If you don't pay? Yes they sure can--it's usually part of the standard mortgage contract! I see 2 other options:
- Bob decides to keep the house and make payments. Before the Estate closes, he will likely have to "close on the house" with the bank in order to get the Mortgage in his name.
- Bob decides to buy the house in cash (think large estate assets). That's easy, it's just like a normal person paying off a house, except it's via the estate. If there are no other heirs, it should be very easy. If there are multiple heirs, then a lawyer probably has to get involved.