I own the title to a single family residence in California with an underwater mortgage, but my brother holds the mortgage. He also owns another property which he lives in. The mortgage on our property is within the FHA conforming loan limits in California, but the combined amounts of both mortgages exceed the FHA conforming loan limits. Can I refinance the mortgage since I hold the title?
3 Answers from Attorneys
The expression "holds the mortgage" to me signifies that he is the lender, not the borrower; I assume that's what you mean also. You essentially borrowed from your brother to buy the house. If that's the case, and subject to any early-payoff penalties (which are limited by law) in the loan terms, it's like any other attempt to refinance an underwater loan. You'll have a hard time finding a lender unless you kick in enough cash to reduce the amount you need to borrow to 100% or less of the appraised value.
Some of the other information in your question leads me to suspect, however, that your brother may be the borrower, not the lender, although "holding" the mortgage usually refers to the lender's involvement. If that is the case, you might want to re-ask your question.
In the simplest terms, however, yes, the title holder is the person who can borrow against a property, and the proceeds of such borrowing would go first to pay off any pre-existing loans and liens of whatever nature and to whomever owed.
It sounds like you should address your question to the FHA.
I read your post the same way Mr. Whipple did. "Holds the mortgage" would mean your brother was the lender. But later you mention the FHA, which would not regulate a private party lender like your brother, so that makes me think your brother is the borrower. You may want to repost and clarify.