Re: What happens when a mortgage is called

OK, here's the problem...the grant deed was signed over and she's been paying the mortgage. To the mortgage company, she owns the property because she is now the rightful title holder. Since the loan is under his name, but not the property, yes, they can cancel the mortgage contract for breach on his part.

Important issues: why did he transfer to her? to hide from creditors is the most common reason and most unexcusable in the Court's eyes.

He needs her to sign over the deed back to him. This may require a lawsuit if she is not amenable to returning it to him. This is something that is best discussed directly and not in eMail because of the multitude of questions that this whole situation raises.

Please feel free to contact our office to discuss this further at 626-578-0708, I am at extension 4.

As for the last part of your question...it depends on the loan institution. They may rewrite it under her, they may sue her to take the home away as a fraudulent transfer and sue her, him or both for damages. There are a lot of possibilities. This is one best nipped in the bud while everyone is still on somewhat of a "nice" level with each other. Believe me....these things can get very nasty at the drop of a hat....tread this one lightly, but swiftly.

Scott

Re: What happens when a mortgage is called

Nearly all "mortgages" (actually, pairings of a promissory note with a deed of trust) contain a "due-on-sale" clause. "Due on sale" means that the entire loan principal balance becomes immediately due and payable when the original owner-borrower sells the collateral (the house).

The solution, which avoids at least one of your brother-in-law's problems (i.e., foreclosure) is to pay off the existing loan, either with cash or by refinancing.

In order to refinance, ownership of the house must be clear and unclouded; and, of course, only the true owner can refinance. Sounds as though the girlfriend is the owner of record, and she is the one who will have to do the re-fi.

Assuming the transfer of the house wasn't done to try to put it out of reach of his creditors or hide assets, or the like, and assuming the two of them can still cooperate on business matters, the two of them should work together to get the old loan paid off before the lender initiates foreclosure proceedings.

Unfortunately, "signing over" a house without getting any money for it, or getting too little, smells of fraud, especially when the donee is a relative or friend. If your brother-in-law has creditors or is facing a judgment, the creditors will be onto this house transfer like flies on a barnyard. House sales or gifts leave a distinct factual trail (at the recorder's office, the assessor's office, and the tax collector's office) that is easily investigated. If there is a discoverable trace of fraud, refinancing may be impossible and a creditor suit attacking both of them is likely.

On the other hand, if there was no equity in the house, there's no fraud, because the creditors were deprived of nothing.