My mom took out an equity loan then placed the property in my name. Now it is in foreclosure. How does this complicate things?
My mom took out an equity loan and but later placed the property in my name. The loan is now in foreclosure. She is working to get it modified but would there be a problem since the property is in my name? All the paperwork the bank has asked for so far (insurance letter, and so on) are all in my mom's name still but the property tax notice is in my name. Will the bank be unreceptive because of this?
You are absolutely correct in thinking that your mother's transferring her property to you (presumably using a quitclaim deed, or a similar device) may cause serious problems now that her home equity lender is attempting to foreclose the property. Actually, your mother has likely breached her loan agreement by transferring the property to you without the lender's consent, so the lender may decide to proceed with foreclosure even if you or your mother brings the loan current. The problem is that, under most mortgages and other loans secured by the borrower's ownership interest in property, the borrower is not permitted to transfer the security property, because such a transfer could complicate the lender's ability to foreclose in case of default.
The lender may consent to a transfer if you are willing to sign an agreement taking over the obligations of the original loan, but this is the lender’s choice, and it may not allow the transfer since the home is already in foreclosure proceedings, or if it thinks that you will be unable to pay the mortgage. If you are interested in taking over the loan, you will need to communicate with the lender, explain the situation, and express your ability and desire to bring the mortgage payments current and that you will be able to make the payments going forward.
Actually, it would probably be best to hire an attorney to communicate with the lender on you and your mother’s behalf. Because the transfer probably violated your mother’s agreement with the lender, you don’t want to exacerbate the problem by trying to negotiate with the lender yourself. Rather, an experienced attorney can tell you what steps you can take to ameliorate the situation before contacting the lender, the best way to approach the lender for negotiations. Your local or state Bar Association should be able to provide you with a referral to a qualified attorney in your area.
In direct response to your question, the unauthorized transfer of the property may be an impediment to your mother’s efforts to negotiate a loan modification with her lender. The lender will be able to foreclose despite the transfer (liens stay with the property, even when the owner changes), but the lender may not want to modify the loan when the property is no longer owned by the borrower. On the other hand, the lender may never even find out that the property has been transferred, depending on what documents they require and how much digging they do into the property’s current status. Again, I encourage you to speak with an attorney about how to best approach these negotiations, as a misstep could cause the lender to become unreceptive to your mother’s efforts to modify her loan and result in its proceeding with foreclosure.
To read more about foreclosure and the various options available to help prevent it, I encourage you to visit the Bills.com Foreclosure page. I wish you and your mother the best of luck in resolving the problems with her mortgage, and hope that the information I have provided helps you Find. Learn. Save.