patrick.net

deeds and liens are two different things.

You or your brother will probably have to refinance it since AFAIK few loans are assumable these days.

The mortgagee will allow you to give the friend a leasehold tenancy and after their lien is extinguished you can deed it to them fully when they pay off the loan.

I've only had one quarter of RE ed, so I don't really know anything, but that's what I know.

The investors that currently own your sister's mortgage are under no obligation to work with her friend and can probably file a Notice of Default whenever they learn of her death and get around to it.

The last mortgage I signed said

DEFAULT. You will be in default on this Note if: ... (5) you die or become legally unable to manage your affairs

and

REMEDIES... Our remedies include the following:

A. Entire Balance Due Immediately. We may require you to immediately pay us in full all amounts you owe under this Note.

IIRC, the three preceding mortgages were the same.

Hmmm. Well, we certainly don't have the cash to pay it off. Could we sell it?

Not if you want the tenant to have it.

Whoever gets deeded the property can try to refi it. If nobody can refi, then yes, you'll have to sell and the tenant will lose.

Bellingham Bob says

Not if you want the tenant to have it.

Whoever gets deeded the property can try to refi it. If nobody can refi, then yes, you'll have to sell and the tenant will lose.

“Nessuna soluzione . . . nessun problema!„

My brother and I don't want to take on a mortgage either. I think my atty said that we won't have any attachments to the home once the quitclaim is done. It will be in his name and it will be his problem, I believe.

Bug your attorney.

PasadenaNative says

It will be in his name and it will be his problem, I believe.

Yup. Whoever the probate court assigns the deed to will have to quitclaim it to the tenant. If the tenant can't refi then them just continuing to make payments on the old loan might be an option. That's a question you can ask your lawyer, LOL.

Did a little research: Looks like the quitclaim will put him in title of the house, not the mortgage. We just don't want to be on the hook in any way!

DennisN says

Bug your attorney.

Feline home appraisers Condoleezza and Dukie

Just left a message with him, lol!

PasadenaNative says

Looks like the quitclaim will put him in title of the house, not the mortgage.

Right, that's what I was saying that a deed is different from a lien. The lien is on the title, and the deed just moves the title around.

My RE class was pretty cool. RE Law is kinda organically weird, like biology almost.

Okay, this is from my atty:

"Hi Trudy, if the lender discovers Pam’s passing, they most likely will require a refinancing or payoff of the mortgage. That is the case whether you transfer the property or not. Hope that answers your question."

So hopefully that means we will not be responsible for the mortgage....

Bellingham Bob says

PasadenaNative says

Looks like the quitclaim will put him in title of the house, not the mortgage.

Right, that's what I was saying that a deed is different from a lien. The lien is on the title, and the deed just moves the title around.

My RE class was pretty cool. RE Law is kinda organically weird, like biology almost.

“Nessuna soluzione . . . nessun problema!„

It sure is confusing sometimes. Having never bought or sold a property, I know very little about it. Since the passing of my mom and sister, I know a tad more, which isn't saying much :)

PasadenaNative says

So hopefully that means we will not be responsible for the mortgage....

The estate is, yes. Dunno how probate works tho.

A proper probate process should actually notify the lienholder that their property interest is in probate, and title to the house should not be deeded to you until this lien thing is taken care of. Guess they don't do that?

Bellingham Bob says

PasadenaNative says

So hopefully that means we will not be responsible for the mortgage....

The estate is, yes. Dunno how probate works tho.

A proper probate process should actually notify the lienholder that their property interest is in probate, and title to the house should not be deeded to you until this lien thing is taken care of. Guess they don't do that?

“Nessuna soluzione . . . nessun problema!„

My sister died intestate. The lawyer is making it so we can quitclaim it directly to her friend. I'm assuming that he will be the one responsible for a refi is that's called for. But, as of now, the lender does not know of her passing...we'll see, I'm sure we'll be sitting down with the atty again soon.

Okay, I just spoke with my atty. If the bank wanted to, it could sell the house and file a claim against her estate, the money from a bank acct. of hers that we closed. The amount is less than $20K and we are using it to support her horse and pay for the legal fees. At least they can't come after us and our savings and rental property. That was my main concern. He said this is highly unlikely to happen.

Thanks all for helping me here :)

PasadenaNative says

The amount is less than $20K and we are using it to support her horse and pay for the legal fees. At least they can't come after us and our savings and rental property. That was my main concern. He said this is highly unlikely to happen.

Yes, this makes sense. The estate is responsible for the mortgage. An estate can file bankruptcy too -- e.g. if the amount owed is more than the assets in the estate.

If the mortgage is non-recourse, the bank can only go after the house. If the mortgage is recourse, the bank can go after that bank account you mentioned.

When you quitclaim, all you're doing is saying, "hey, there's this house that I may or may not have title to. I don't know what rights I have, nor do I care, but whatever they are, I'm giving them to you."

Either during probate or after the quitclaim, the bank will wise up and either say:
1) executor, please sell the property and give us the amount we're due, and give the remaining cash, if any, to PasadenaNative and her bro, and if it sells for less than the loan, seek a deficiency against sister's estate if the mortgage is recourse;
2) sister's friend, if you keep paying the mortgage as due, we'll let you assume the mortgage in this case, especially since we're not in the mood to foreclose or spend money on lawyers or take on yet another property; or
3) something else that's in between

Thanks, Corntrollio, that makes sense now.

This is her property, in case anyone is curious. I wouldn't want to live there, but she liked it.

http://www.redfin.com/CA/APPLE-VALLEY/11212-PIONEER-RD-92308/home/3691626

PasadenaNative says

This is her property, in case anyone is curious. I wouldn't want to live there, but she liked it.

http://www.redfin.com/CA/APPLE-VALLEY/11212-PIONEER-RD-92308/home/3691626

I didn't mean curious about buying it! :-/ I'd probably have to twist both your arms and then some, lol!

Quitclaim deeds are often used in transactions between nations. When the US "bought" Alaska from Russia for $7 million, what we really got was a quitclaim deed from the Russians. It only said that Russia "quit" their "claim" to Alaska, not that others (e.g. the UK) might have their own claims to Alaska. Fortunately the Brits didn't want Alaska at the time.

You should recommend that the tenant apply for mortgage pre-approval at a local credit union or small local bank.
The actual cash or present market value of the house and the amount of the mortgage will play a big role in whether the house can be refinanced.

If there is a reasonable amount of equity then a local bank or credit union my finance it even with poor credit as long as the tenant has a reliable source of income to make payments. if the value and dept are close together or negative equity then the tenant should probably contact the bank for a short sale at a reduced price.

Good Luck

Thanks, Robert C. I also think he should sit down with an atty. for some advice. I will be glad when this is all over. I still can't believe my sister is gone....

Contact your local title co to transfer title to friend. Your local title company can complete the proper legal forms and confirm that it is recorded in your county.

Once title has been transferred by you and your brother, the friend can "Assume" the mortgage - usually costs $1000 - $2000 for QUALIFYING ASSUMPTION. If new owner cant qualify they can continue to pay existing loan until it is paid off or can qualify for new loan.

Do not miss any mortgage payments and confirm that taxes and insurance have been paid to date.

Wally says

Contact your local title co to transfer title to friend. Your local title company can complete the proper legal forms and confirm that it is recorded in your county.

Once title has been transferred by you and your brother, the friend can "Assume" the mortgage - usually costs $1000 - $2000 for QUALIFYING ASSUMPTION. If new owner cant qualify they can continue to pay existing loan until it is paid off or can qualify for new loan.

Do not miss any mortgage payments and confirm that taxes and insurance have been paid to date.

Thanks. Our atty is handling all of this for us...

There is something screwy about this. Your sister's friend cannot just keep paying a mortgage that he did not sign and have all of you expect everything to work out OK. The lender is not going to allow the mortgage by a deceased person to remain active for long without a new debtor, or more likely, a payoff. And it seems like a bad idea to quitclaim the home to someone when your sister's estate remains liable for the loan. Get advise from your lawyer that you can understand.

Payoff2011 says

There is something screwy about this. Your sister's friend cannot just keep paying a mortgage that he did not sign and have all of you expect everything to work out OK. The lender is not going to allow the mortgage by a deceased person to remain active for long without a new debtor, or more likely, a payoff. And it seems like a bad idea to quitclaim the home to someone when your sister's estate remains liable for the loan. Get advise from your lawyer that you can understand.

If the bank doesn't find out that she passed he can. I trust my lawyer here, not you! There is basically zilch in her estate. The bank cannot come after us.

shrekgrinch says

Can her friend prove that he/she has been making the payments on the mortgage and if so, for how long?

If it has been a year or so and he/she can provide other financials to the bank, the bank just might make an exception anyway. After all, they want a paying asset (the mortgage instrument) over another foreclosure mess.

Yes, he's been making the payments since Dec. He has proof. This will all be finished in about ten days. Then it will be her friend's problem, not ours.

Have your attorney prepare a special warranty deed. quit claim deed does not convey ownership, it conveys any interest you may have. Once you convey the deed, just keep the mortgage thats on the property in place under your sisters' name. If the friend doesn't pay the monthly mortgage the lender will foreclose against you sisters' estate and her friend who's on the deed, known as the terre tenant. The lender doesn't care if Bozo the Clown makes the monthly payment, but, will care if the payment is not made monthly. Thats when they foreclose againt the original borrower and who ever is currently on the Deed.

No, her estate has the debt obligation, not me. The bank could go after her estate, not me personally.

ptiemann says

Lenders can demand full payment ('due on sale' clause) with most loans. Exception would be FHA loans which are assumable.

It is an FHA loan.

Look, this is a top estate law firm in Burbank that has been around for a very long time. They deal mainly with estates and probates. I have used them for over twenty years and have never been misguided, nor have friends who have used them with their real estate issues. I am aware that the bank may find out and file a claim against her estate. I am ready for that. What's done is done, I cannot change that. Hopefully, her friend will seek advice of counsel and prepare to lose the house or seek mortgage approval, etc.

So, let's just end this thread now that I know more of what is going on, and since you all don't know the specifics of this situation. Thank you for replying, but I will not be taking your advice unless you can prove you are a practicing atty.

the Doctor says

Have your attorney prepare a special warranty deed. quit claim deed does not convey ownership, it conveys any interest you may have. Once you convey the deed, just keep the mortgage thats on the property in place under your sisters' name. If the friend doesn't pay the monthly mortgage the lender will foreclose against you sisters' estate and her friend who's on the deed, known as the terre tenant. The lender doesn't care if Bozo the Clown makes the monthly payment, but, will care if the payment is not made monthly. Thats when they foreclose againt the original borrower and who ever is currently on the Deed.

As Columbo would say, "Just one more thing.." In regards to a special warranty deed:

"it will just be a quitclaim deed, which is better protection to you than a special warranty deed—you do not want to be making any warranties, even limited ones."

the Doctor says

Have your attorney prepare a special warranty deed.

This is not a good suggestion. The goal is not to make any warranty at all, as PasadenaNative suggested. There are six specific real estate-related warranties that are typical in a general warranty deed. A special warranty deed makes these six warranties only for the time that it was in your possession. A quitclaim makes no warranties at all -- it's not even technically a deed.

PasadenaNative would definitely not want to make a special warranty deed in this case because PasadenaNative with virtual certainty knows that the property is encumbered.

You may be confusing a special warranty deed with a bargain and sale deed, which does not warrant against encumbrances.