Mortgage Cosigner Legal Help

[KenLee]

Depends on how the loan was written as Cosigners certainly can be on the deed. Now if the OP cosigned without being put on the deed..... then very foolish.

There you go. Most don't have cosigner on the deed. If OP is on the deed, a Partition Action is an option.

 

[fmyth]

Lender is much more likely to waive your deficiency judgement if you work with them and cooperate to help them get access to their collateral.

If the sister and her man won't pay the mortgage what are the odds that they will cooperate and give a deed in lieu of foreclosure and move out without a fight?

 

[KenLee]

If the sister and her man won't pay the mortgage what are the odds that they will cooperate and give a deed in lieu of foreclosure and move out without a fight?

I meant the OP cooperating w bank.

 

[19hunt92]

There you go. Most don't have cosigner on the deed. If OP is on the deed, a Partition Action is an option.

In this situation cosign is not on the deed, Ken I will send you a DM as well and I think I have a list of attorneys in my area as well. Have to see if they are in the construction side per day as well

 

[fmyth]

I meant the OP cooperating w bank.

The OP is only 1 party to the mortgage and is not in possession of the property. Both parties on the note would need to sign a deed in lieu and the occupant would have to move out. I don't know anyone involved but based upon what the OP has posted it doesn't sound like it's likely.

 

[fmyth]

In this situation cosign is not on the deed, Ken I will send you a DM as well and I think I have a list of attorneys in my area as well. Have to see if they are in the construction side per day as well

Are you sure she was the co signer and not the co borrower? If its a conventional loan probably a co signer if a FHA or USDA then most likely a co borrower. Co borrower would be better in this situation. Co signer would likely have even less leverage to force a sale.

 

[KenLee]

The OP is only 1 party to the mortgage and is not in possession of the property. Both parties on the note would need to sign a deed in lieu and the occupant would have to move out. I don't know anyone involved but based upon what the OP has posted it doesn't sound like it's likely.

I understand this, but a foreclosure action sues all persons on the mortgage. Telling the bank that the occupants have no desire to work things out may well speed up a foreclosure filing.

 

[svivian]

Many lessons to be learned in this thread.

 

[turbobrick]

No advice to give, but I feel your pain having previously been financially tied to a family member. Greatest day ever when I finally was able to close that chapter of my life.

 

[svivian]

Op I ask this question as a lesson to others and not to be rude to you. But how did you or your wife not know they had missed 45% of their payments till now?

 

[19hunt92]

Great question and there are details I left out but short version, took the word of a family member and trusted notification if payment could not be made. Did not watch credit as the credit was not having to be accessed (no loans for vehicle, refinancing, mortgage, etc)
Tried starting a new loan and pulled credit seeing it had dropped 200+ points. And here we are now.
Lessons were learned from this. Always put a clause in to be notified of late payment with a version of repercussion if not. Be put on the deed. Have a clause in place that the cosign gains part of the asset if he/she pays the loan. OR don't cosign obviously.

 

[fwafwow]

OP - sorry you are going through this. It's a good reminder to be careful, even (or especially) with family.

There are a few nuggets above that are probably right, and some other suggestions that I think are well-intentioned, but off base enough that you may go on a detour and waste time. The only advice that is solid is to hire an attorney and to disregard everyone else's recommendations and input - including my feedback below (none of which is legal advice or can be relied on by anyone - especially anyone who sees my other posts on RS).

And if you find an attorney, I expect you will pay more than you think (and definitely more than you want). Maybe look for someone other than a real estate closing attorney (as mentioned above), and see if you can find one who knows what suretyship and subrogation mean.

I was thinking It gets the deadbeat off the deed so he can deal with the bank but it won’t get the deadbeat off the bank note.

The last part is pretty much right. There are probably three documents involved. (There could be a 4th - if the OP signed a guarantee.) The promissory note (referenced above) which is the obligation of the borrower(s) to the bank. The "deed" is usually the reference to a warranty (or other type of) deed that the owners of the property got when they purchased the house and which evidences their ownership of the property. The "mortgage" is the security interest/deed that reflects the bank's security interest in the property. Being on the title/deed can be unrelated to being a borrower, and even if the owner is a borrower, getting off of the deed (such as by quit claiming one's OWN interest) should not impact the bank's promissory note or security interest rights.

Are the relatives willing to remove themselves from the note, vacate, and allow you to take it over and bring it back to good standing to then put on the market and maybe you can recoup some of your investment and headache?
Hopefully the property has at least appreciated in value.

One can't remove oneself from a note. It's a contract and an amendment needs the agreement of the others, and the bank would be unlikely to release anyone who is a party to the note.

The only instance I saw a quick deed issued was when a divorce occured to make it a clean separation. Wasn't sure how that could be forced in just a family disgruntled situation. May have to dig deeper/lawyer

I think a QCD in a divorce is not going to be a good analogy. Divorces can end by agreement, and part of that could have been one spouse agreed to release the title in the property via a QCD. Even if the bad family member would provide a QCD, it would not help with respect to the bank. And in divorce situations, the bank usually won't give in and will insist on refinancing or repayment under the original note.

Correct, the court can say you are forced to refinance, but they have zero influence over the bank. Bank is not required to make a bad loan. Get an attorney.

^^^^This

For my state, the last time I checked (decades ago), the morgage holder has a legal obligation to notify the co-signed of any late payments in a timely manner. If they failed to do that, and if the law is the same then from a legal perspective, they can not require the co-signer to make up missed payments, no put negative info on the co-signers credit report. However, you will likely need legal support from an attorney. I experienced this on a vehicle loan decades ago, and was fortunate to simply let the bank know that I knew the law and would take legal action against them if they reported it on my credit. However, I was never notified until the vehicle had been repossessed. There were no different requirements for morgages at the time of my experience.

I'm not sure this is right, but it doesn't strike me as what I would have expected. This could vary by state law, or perhaps (but not likely) by contract.

You couldn't strike up a separate legal partnership agreement based upon the purchase with terms on how things will be addressed in different circumstances? I know guys who buy recreational land in a partnership set up some kind of LLC or legal agreement to address these types of problems.

Definitely, but I don't think a side deal here - at this point - would help the OP unless he could get the bank to participate. But I wouldn't hold my breath on that. This would have been a better alternative to consider up front - but it still might not have avoided the OP being on the hook, as the bank would have been unlikely to loan to the entity without personal liability.

I don't know of any states that allow wage garnishment for a mortgage judgment.
I do know what a deficiency judgment is, that's why I say push for as quick a foreclosure as possible. Get the deadbeats out while housing prices are still high, and prevent another 18 months of missed payments. No way I'd make payments to extend the misery.

If someone gets a judgment against you, they can typically choose from a host of ways in which to enforce that judgment, including selling the house, placing liens on and selling your other property, and garnishing wages. I suppose a state could have a law that exempts wage garnishment.

 

[KenLee]

OP - sorry you are going through this. It's a good reminder to be careful, even (or especially) with family.

There are a few nuggets above that are probably right, and some other suggestions that I think are well-intentioned, but off base enough that you may go on a detour and waste time. The only advice that is solid is to hire an attorney and to disregard everyone else's recommendations and input - including my feedback below (none of which is legal advice or can be relied on by anyone - especially anyone who sees my other posts on RS).

And if you find an attorney, I expect you will pay more than you think (and definitely more than you want). Maybe look for someone other than a real estate closing attorney (as mentioned above), and see if you can find one who knows what suretyship and subrogation mean.


The last part is pretty much right. There are probably three documents involved. (There could be a 4th - if the OP signed a guarantee.) The promissory note (referenced above) which is the obligation of the borrower(s) to the bank. The "deed" is usually the reference to a warranty (or other type of) deed that the owners of the property got when they purchased the house and which evidences their ownership of the property. The "mortgage" is the security interest/deed that reflects the bank's security interest in the property. Being on the title/deed can be unrelated to being a borrower, and even if the owner is a borrower, getting off of the deed (such as by quit claiming one's OWN interest) should not impact the bank's promissory note or security interest rights.

One can't remove oneself from a note. It's a contract and an amendment needs the agreement of the others, and the bank would be unlikely to release anyone who is a party to the note.

I think a QCD in a divorce is not going to be a good analogy. Divorces can end by agreement, and part of that could have been one spouse agreed to release the title in the property via a QCD. Even if the bad family member would provide a QCD, it would not help with respect to the bank. And in divorce situations, the bank usually won't give in and will insist on refinancing or repayment under the original note.

^^^^This

I'm not sure this is right, but it doesn't strike me as what I would have expected. This could vary by state law, or perhaps (but not likely) by contract.


Definitely, but I don't think a side deal here - at this point - would help the OP unless he could get the bank to participate. But I wouldn't hold my breath on that. This would have been a better alternative to consider up front - but it still might not have avoided the OP being on the hook, as the bank would have been unlikely to loan to the entity without personal liability.

If someone gets a judgment against you, they can typically choose from a host of ways in which to enforce that judgment, including selling the house, placing liens on and selling your other property, and garnishing wages. I suppose a state could have a law that exempts wage garnishment.

It's only gonna get worse the longer it drags out.

 

[MattB]

Is there equity in the house? You seem to imply there was, and it makes a difference as to whether the borrowers may be subject to actions in the event the bank sells the house. If there is ample equity there should not be any deficiency that would cause the banks to act directly against the borrowers (although I admittedly do not know the specific laws that apply in your state).

 

[19hunt92]

Is there equity in the house? You seem to imply there was, and it makes a difference as to whether the borrowers may be subject to actions in the event the bank sells the house. If there is ample equity there should not be any deficiency that would cause the banks to act directly against the borrowers (although I admittedly do not know the specific laws that apply in your state).

Guessing this is more directed to taking seizure of the property ourselves...
Yes there is equity, I believe roughly 10-20% was put down and to this point, another 3% paid off. Very cringe I know.
There isn't any deficiency to the property based on the loan amount and how the area has appreciated unless more has been eroded/neglected on the house than what I know of.

I will be getting these details in the next week and moving forward with an action plan from there depending on what an attorney adds or detracts from my thoughts

 

[Marbles]

I think the loan and the bank are one issue, and I suspect you are on the hook.

Then there is you and the person you cosigned for. You can probably sue them for whatever liability you end up with. However, you cannot squeeze blood out of a turnip and a judgement against your in-laws may be worth less than the paper it is written on.

Get a lawyer to discuss both possibilities (potentially a different lawyer for each). Decide how nasty you personally are willing to get, then play for keeps, but don't cross that line, where ever it is drawn.

 

[Billy Goat]

OP - sorry you are going through this. It's a good reminder to be careful, even (or especially) with family.

There are a few nuggets above that are probably right, and some other suggestions that I think are well-intentioned, but off base enough that you may go on a detour and waste time. The only advice that is solid is to hire an attorney and to disregard everyone else's recommendations and input - including my feedback below (none of which is legal advice or can be relied on by anyone - especially anyone who sees my other posts on RS).

And if you find an attorney, I expect you will pay more than you think (and definitely more than you want). Maybe look for someone other than a real estate closing attorney (as mentioned above), and see if you can find one who knows what suretyship and subrogation mean.


The last part is pretty much right. There are probably three documents involved. (There could be a 4th - if the OP signed a guarantee.) The promissory note (referenced above) which is the obligation of the borrower(s) to the bank. The "deed" is usually the reference to a warranty (or other type of) deed that the owners of the property got when they purchased the house and which evidences their ownership of the property. The "mortgage" is the security interest/deed that reflects the bank's security interest in the property. Being on the title/deed can be unrelated to being a borrower, and even if the owner is a borrower, getting off of the deed (such as by quit claiming one's OWN interest) should not impact the bank's promissory note or security interest rights.

One can't remove oneself from a note. It's a contract and an amendment needs the agreement of the others, and the bank would be unlikely to release anyone who is a party to the note.

I think a QCD in a divorce is not going to be a good analogy. Divorces can end by agreement, and part of that could have been one spouse agreed to release the title in the property via a QCD. Even if the bad family member would provide a QCD, it would not help with respect to the bank. And in divorce situations, the bank usually won't give in and will insist on refinancing or repayment under the original note.

^^^^This

I'm not sure this is right, but it doesn't strike me as what I would have expected. This could vary by state law, or perhaps (but not likely) by contract.


Definitely, but I don't think a side deal here - at this point - would help the OP unless he could get the bank to participate. But I wouldn't hold my breath on that. This would have been a better alternative to consider up front - but it still might not have avoided the OP being on the hook, as the bank would have been unlikely to loan to the entity without personal liability.

If someone gets a judgment against you, they can typically choose from a host of ways in which to enforce that judgment, including selling the house, placing liens on and selling your other property, and garnishing wages. I suppose a state could have a law that exempts wage garnishment.

Anyone who read this owes $6 to the scope testing fund for @fwafwow time invested. He gave a cheap education here that would cost a lot more in person. Even if you didn't need the education, it was worth taking in.

 

[longspeak74]

"Decide how nasty you personally are willing to get, then play for keeps, but don't cross that line, where ever it is drawn."

The line was already crossed by the in-laws...it's time to take the gloves off, get an attorney and be done with them for good. Burn the bridge.

 

[Silveroddo]

That sucks man,
Realistically I'm guessing your options will sound something like this, even with a lawyer I'll venture to guess it comes down to 1 of 3 things.
1) You find a technicality that gets you out of the note, not very realistic, but it could happen and a lawyer is going to be instrumental in this. Any original documentation you received at the time of signing will be pertinent to this line of attack.
2) You figure out a way to make the financial institution whole. Only you know what the situation is, but you're financially on the hook so the bank is not going to let up until things are back on track, you may need to baby sit things for a few years to finally cultivate the situation that gets everyone to sign off that you're off the note. Hopefully the property appreciates and interest rates come down enough that equity develops in the property and it can be refinanced without your help. I'm not going to delve into all of the scenarios that can play out in this situation, only you can decide what you're willing to do if you go down this road and if you are working with a situation that is resolvable.
3) You figure out legally what the bank can do and what the worse case scenario is, and its possible that its less of a headache and financial hardship to bomb your credit for 7 years than it is to deal with option 2. Its sucks, but so do all of the other options.
This isn't legal advice, but I have seen about half a dozen situations play out similar to this and there was no magic option to make it all go away and it was never clean and easy. The hand holding and the property appreciating in value was the only thing that saved it half the time. Things went south and got ugly the other half of the time.
Again, sorry that you're going through it, but hopefully you sharing this helps other people avoid it. Student loans are another one. My old boss ended up on the hook for 100K worth of his kids student loans for an underwater basket weaving degree that didn't pay off.

 

[ianpadron]

Lawyer up, plain and simple.

Pro tip for others who may be faced with a co-signer situation (aside from the best option to "just say no")

Have the party you're helping out sign a "performance deed" and record that against the property, with specific verbiage requiring them to keep the financing current (and whatever other conditions you want) and giving you the ability to immediately take sole ownership in the event of the recorded obligations not being met. You're still stuck with the mortgage but at least you then have fee simple ownership to dispo the property and save your credit score.